The Vanguard S&P 500 ETF (VOO) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. VOO is a Vanguard Large Blend fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between VOO and HYG? And which fund is better?
The expense ratio of VOO is 0.45 percentage points lower than HYG’s (0.03% vs. 0.48%). VOO also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, VOO has provided higher returns than HYG over the past ten years.
In this article, we’ll compare VOO vs. HYG. We’ll look at fund composition and risk metrics, as well as at their industry exposure and performance. Moreover, I’ll also discuss VOO’s and HYG’s holdings, annual returns, and portfolio growth and examine how these affect their overall returns.
Summary
| VOO | HYG | |
| Name | Vanguard S&P 500 ETF | iShares iBoxx $ High Yield Corporate Bond ETF |
| Category | Large Blend | High Yield Bond |
| Issuer | Vanguard | iShares |
| AUM | 753.41B | 20.03B |
| Avg. Return | 14.45% | 6.42% |
| Div. Yield | 1.34% | 4.44% |
| Expense Ratio | 0.03% | 0.48% |
The Vanguard S&P 500 ETF (VOO) is a Large Blend fund that is issued by Vanguard. It currently has 753.41B total assets under management and has yielded an average annual return of 14.45% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.03%.
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%.
VOO’s dividend yield is 3.10% lower than that of HYG (1.34% vs. 4.44%). Also, VOO yielded on average 8.03% more per year over the past decade (14.45% vs. 6.42%). The expense ratio of VOO is 0.45 percentage points lower than HYG’s (0.03% vs. 0.48%).
Fund Composition
Holdings
| VOO Holdings | Weight |
| Apple Inc | 5.92% |
| Microsoft Corp | 5.62% |
| Amazon.com Inc | 4.06% |
| Facebook Inc Class A | 2.29% |
| Alphabet Inc Class A | 2.02% |
| Alphabet Inc Class C | 1.97% |
| Tesla Inc | 1.44% |
| Berkshire Hathaway Inc Class B | 1.44% |
| NVIDIA Corp | 1.37% |
| JPMorgan Chase & Co | 1.3% |
VOO’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.92%, 5.62%, 4.06%, 2.29%, and 2.02%.
Alphabet Inc Class C (1.97%), Tesla Inc (1.44%), and Berkshire Hathaway Inc Class B (1.44%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VOO’s holdings at 1.37% and 1.3%.
| HYG Bond Sectors | Weight |
| BB | 56.53% |
| B | 31.27% |
| Below B | 11.4% |
| BBB | 0.61% |
| AAA | 0.28% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
| Others | -0.09% |
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.
Performance
Annual Returns
| Year | VOO | HYG |
| 2020 | 18.35% | 4.12% |
| 2019 | 31.46% | 14.23% |
| 2018 | -4.42% | -1.93% |
| 2017 | 21.78% | 6.09% |
| 2016 | 11.93% | 13.92% |
| 2015 | 1.35% | -5.55% |
| 2014 | 13.63% | 2.0% |
| 2013 | 32.33% | 5.9% |
| 2012 | 15.98% | 13.83% |
| 2011 | 2.09% | 5.89% |
| 2010 | 0.0% | 12.07% |
VOO had its best year in 2013 with an annual return of 32.33%. VOO’s worst year over the past decade yielded -4.42% and occurred in 2018. In most years the Vanguard S&P 500 ETF provided moderate returns such as in 2016, 2014, and 2012 where annual returns amounted to 11.93%, 13.63%, and 15.98% 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.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VOO | $10,000 | $36,575 | 14.45% |
| HYG | $10,000 | $17,335 | 6.42% |
A $10,000 investment in VOO would have resulted in a final balance of $36,575. This is a profit of $26,575 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.45%.
With a $10,000 investment in HYG, the end total would have been $17,335. This equates to a $7,335 profit over 10 years and a compound annual growth rate (CAGR) of 6.42%.
VOO’s CAGR is 8.03 percentage points higher than that of HYG and as a result, would have yielded $19,240 more on a $10,000 investment. Thus, VOO outperformed HYG by 8.03% annually.
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