The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. VIG is a Vanguard Large Blend fund and SHY is a iShares Short Government fund. So, what’s the difference between VIG and SHY? And which fund is better?
The expense ratio of VIG is 0.09 percentage points lower than SHY’s (0.06% vs. 0.15%). VIG also has a high exposure to the industrials sector while SHY is mostly comprised of AAA bonds. Overall, VIG has provided higher returns than SHY over the past ten years.
In this article, we’ll compare VIG vs. SHY. We’ll look at fund composition and portfolio growth, as well as at their performance and holdings. Moreover, I’ll also discuss VIG’s and SHY’s industry exposure, risk metrics, and annual returns and examine how these affect their overall returns.
|Name||Vanguard Dividend Appreciation Index Fund ETF Shares||iShares 1-3 Year Treasury Bond ETF|
|Category||Large Blend||Short Government|
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 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%.
VIG’s dividend yield is 1.10% higher than that of SHY (1.56% vs. 0.46%). Also, VIG yielded on average 12.07% more per year over the past decade (13.35% vs. 1.27%). The expense ratio of VIG is 0.09 percentage points lower than SHY’s (0.06% vs. 0.15%).
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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%.
|SHY Bond Sectors||Weight|
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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The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a Mean Return of 1.09 with a R-squared of 92.2 and a Standard Deviation of 12.25. Its Alpha is 0.12 while VIG’s Treynor Ratio is 14.33. Furthermore, the fund has a Sharpe Ratio of 1.01 and a Beta of 0.86.
The iShares 1-3 Year Treasury Bond ETF (SHY) has a Beta of 0.18 with a Alpha of -0.03 and a R-squared of 39.11. Its Standard Deviation is 0.89 while SHY’s Sharpe Ratio is 0.54. Furthermore, the fund has a Treynor Ratio of 2.6 and a Mean Return of 0.09.
VIG’s Mean Return is 1.00 points higher than that of SHY and its R-squared is 53.09 points higher. With a Standard Deviation of 12.25, VIG is slightly more volatile than SHY. The Alpha and Beta of VIG are 0.15 points higher and 0.68 points higher than SHY’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 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.
|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 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%.
VIG’s CAGR is 12.07 percentage points higher than that of SHY and as a result, would have yielded $26,465 more on a $10,000 investment. Thus, VIG outperformed SHY by 12.07% annually.
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