The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. VIG is a Vanguard Large Blend fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between VIG and HYG? And which fund is better?
The expense ratio of VIG is 0.42 percentage points lower than HYG’s (0.06% vs. 0.48%). VIG also has a high exposure to the industrials sector while HYG is mostly comprised of BB bonds. Overall, VIG has provided higher returns than HYG over the past ten years.
In this article, we’ll compare VIG vs. HYG. We’ll look at industry exposure and fund composition, as well as at their annual returns and portfolio growth. Moreover, I’ll also discuss VIG’s and HYG’s holdings, risk metrics, and performance and examine how these affect their overall returns.
|Name||Vanguard Dividend Appreciation Index Fund ETF Shares||iShares iBoxx $ High Yield Corporate Bond ETF|
|Category||Large Blend||High Yield Bond|
The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) is a Large Blend fund that is issued by Vanguard. It currently has 71.92B total assets under management and has yielded an average annual return of 13.35% over the past 10 years. The fund has a dividend yield of 1.56% with an expense ratio of 0.06%.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is a High Yield Bond fund that is issued by iShares. It currently has 20.03B total assets under management and has yielded an average annual return of 6.42% over the past 10 years. The fund has a dividend yield of 4.44% with an expense ratio of 0.48%.
VIG’s dividend yield is 2.88% lower than that of HYG (1.56% vs. 4.44%). Also, VIG yielded on average 6.93% more per year over the past decade (13.35% vs. 6.42%). The expense ratio of VIG is 0.42 percentage points lower than HYG’s (0.06% vs. 0.48%).
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|JPMorgan Chase & Co||3.8%|
|Johnson & Johnson||3.67%|
|Visa Inc Class A||3.22%|
|UnitedHealth Group Inc||3.22%|
|The Home Depot Inc||2.91%|
|Procter & Gamble Co||2.82%|
|Comcast Corp Class A||2.21%|
VIG’s Top Holdings are Microsoft Corp, JPMorgan Chase & Co, Johnson & Johnson, Walmart Inc, and Visa Inc Class A at 4.19%, 3.8%, 3.67%, 3.38%, and 3.22%.
UnitedHealth Group Inc (3.22%), The Home Depot Inc (2.91%), and Procter & Gamble Co (2.82%) have a slightly smaller but still significant weight. Comcast Corp Class A and Coca-Cola Co are also represented in the VIG’s holdings at 2.21% and 1.98%.
|HYG Bond Sectors||Weight|
HYG’s Top Bond Sectors are ratings of BB, B, Below B, BBB, and AAA at 56.53%, 31.27%, 11.4%, 0.61%, and 0.28%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.
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The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a R-squared of 92.2 with a Mean Return of 1.09 and a Treynor Ratio of 14.33. Its Beta is 0.86 while VIG’s Alpha is 0.12. Furthermore, the fund has a Sharpe Ratio of 1.01 and a Standard Deviation of 12.25.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Alpha of 3.58 with a Standard Deviation of 6.96 and a R-squared of 4.1. Its Sharpe Ratio is 0.7 while HYG’s Beta is 0.48. Furthermore, the fund has a Mean Return of 0.46 and a Treynor Ratio of 10.01.
VIG’s Mean Return is 0.63 points higher than that of HYG and its R-squared is 88.10 points higher. With a Standard Deviation of 12.25, VIG is slightly more volatile than HYG. The Alpha and Beta of VIG are 3.46 points lower and 0.38 points higher than HYG’s Alpha and Beta.
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VIG had its best year in 2019 with an annual return of 29.71%. VIG’s worst year over the past decade yielded -2.02% and occurred in 2018. In most years the Vanguard Dividend Appreciation Index Fund ETF Shares provided moderate returns such as in 2012, 2016, and 2010 where annual returns amounted to 11.61%, 11.84%, and 14.67% respectively.
The year 2019 was the strongest year for HYG, returning 14.23% on an annual basis. The poorest year for HYG in the last ten years was 2015, with a yield of -5.55%. Most years the iShares iBoxx $ High Yield Corporate Bond ETF has given investors modest returns, such as in 2011, 2013, and 2017, when gains were 5.89%, 5.9%, and 6.09% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VIG would have resulted in a final balance of $37,951. This is a profit of $27,951 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.35%.
With a $10,000 investment in HYG, the end total would have been $19,427. This equates to a $9,427 profit over 11 years and a compound annual growth rate (CAGR) of 6.42%.
VIG’s CAGR is 6.93 percentage points higher than that of HYG and as a result, would have yielded $18,524 more on a $10,000 investment. Thus, VIG outperformed HYG by 6.93% annually.
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