VGT vs. SHY: What’s The Difference?

The Vanguard Information Technology Index Fund ETF Shares (VGT) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. VGT is a Vanguard Technology fund and SHY is a iShares Short Government fund. So, what’s the difference between VGT and SHY? And which fund is better?

The expense ratio of VGT is 0.05 percentage points lower than SHY’s (0.1% vs. 0.15%). VGT also has a high exposure to the technology sector while SHY is mostly comprised of AAA bonds. Overall, VGT has provided higher returns than SHY over the past ten years.

In this article, we’ll compare VGT vs. SHY. We’ll look at holdings and performance, as well as at their fund composition and annual returns. Moreover, I’ll also discuss VGT’s and SHY’s portfolio growth, risk metrics, and industry exposure and examine how these affect their overall returns.

Summary

VGT SHY
Name Vanguard Information Technology Index Fund ETF Shares iShares 1-3 Year Treasury Bond ETF
Category Technology Short Government
Issuer Vanguard iShares
AUM 54.13B 19.51B
Avg. Return 20.84% 1.27%
Div. Yield 0.66% 0.46%
Expense Ratio 0.1% 0.15%

The Vanguard Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.

The iShares 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.

VGT’s dividend yield is 0.20% higher than that of SHY (0.66% vs. 0.46%). Also, VGT yielded on average 19.56% more per year over the past decade (20.84% vs. 1.27%). The expense ratio of VGT is 0.05 percentage points lower than SHY’s (0.1% vs. 0.15%).

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Fund Composition

Holdings

VGT - Holdings

VGT Holdings Weight
Apple Inc 19.58%
Microsoft Corp 16.53%
NVIDIA Corp 4.22%
Visa Inc Class A 3.16%
PayPal Holdings Inc 2.76%
Mastercard Inc Class A 2.76%
Adobe Inc 2.39%
Intel Corp 1.94%
Salesforce.com Inc 1.91%
Cisco Systems Inc 1.9%

VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.

Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.

SHY - Holdings

SHY Bond Sectors Weight
AAA 99.67%
Others 0.33%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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Risk Analysis

VGT SHY
Mean Return 1.76 0.09
R-squared 74.84 39.11
Std. Deviation 16.61 0.89
Alpha 10.41 -0.03
Beta 1.02 0.18
Sharpe Ratio 1.23 0.54
Treynor Ratio 20.55 2.6

The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Mean Return of 1.76 with a Treynor Ratio of 20.55 and a Sharpe Ratio of 1.23. Its Alpha is 10.41 while VGT’s Standard Deviation is 16.61. Furthermore, the fund has a Beta of 1.02 and a R-squared of 74.84.

The iShares 1-3 Year Treasury Bond ETF (SHY) has a Treynor Ratio of 2.6 with a Mean Return of 0.09 and a Beta of 0.18. Its Sharpe Ratio is 0.54 while SHY’s Standard Deviation is 0.89. Furthermore, the fund has a R-squared of 39.11 and a Alpha of -0.03.

VGT’s Mean Return is 1.67 points higher than that of SHY and its R-squared is 35.73 points higher. With a Standard Deviation of 16.61, VGT is slightly more volatile than SHY. The Alpha and Beta of VGT are 10.44 points higher and 0.84 points higher than SHY’s Alpha and Beta.

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Performance

Annual Returns

VGT vs. SHY - Annual Returns

Year VGT SHY
2020 45.94% 3.01%
2019 48.68% 3.42%
2018 2.52% 1.45%
2017 37.07% 0.27%
2016 13.73% 0.75%
2015 5.02% 0.43%
2014 18.01% 0.48%
2013 30.91% 0.23%
2012 14.05% 0.31%
2011 0.52% 1.43%
2010 12.74% 2.23%

VGT had its best year in 2019 with an annual return of 48.68%. VGT’s worst year over the past decade yielded 0.52% and occurred in 2011. In most years the Vanguard Information Technology Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 13.73%, 14.05%, and 18.01% respectively.

The year 2019 was the strongest year for SHY, returning 3.42% on an annual basis. The poorest year for SHY in the last ten years was 2013, with a yield of 0.23%. Most years the iShares 1-3 Year Treasury Bond ETF has given investors modest returns, such as in 2014, 2016, and 2011, when gains were 0.48%, 0.75%, and 1.43% respectively.

Portfolio Growth

VGT vs. SHY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VGT $10,000 $72,718 20.84%
SHY $10,000 $11,486 1.27%

A $10,000 investment in VGT would have resulted in a final balance of $72,718. This is a profit of $62,718 over 11 years and amounts to a compound annual growth rate (CAGR) of 20.84%.

With a $10,000 investment in SHY, the end total would have been $11,486. This equates to a $1,486 profit over 11 years and a compound annual growth rate (CAGR) of 1.27%.

VGT’s CAGR is 19.56 percentage points higher than that of SHY and as a result, would have yielded $61,232 more on a $10,000 investment. Thus, VGT outperformed SHY by 19.56% annually.


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