The Vanguard S&P 500 ETF (VOO) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. VOO is a Vanguard Large Blend fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between VOO and IGSB? And which fund is better?
The expense ratio of VOO is 0.03 percentage points lower than IGSB’s (0.03% vs. 0.06%). VOO also has a high exposure to the technology sector while IGSB is mostly comprised of BBB bonds. Overall, VOO has provided higher returns than IGSB over the past ten years.
In this article, we’ll compare VOO vs. IGSB. We’ll look at risk metrics and portfolio growth, as well as at their industry exposure and holdings. Moreover, I’ll also discuss VOO’s and IGSB’s fund composition, annual returns, and performance and examine how these affect their overall returns.
|Name||Vanguard S&P 500 ETF||iShares 1-5 Year Investment Grade Corporate Bond ETF|
|Category||Large Blend||Short-Term Bond|
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 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.
VOO’s dividend yield is 0.68% lower than that of IGSB (1.34% vs. 2.02%). Also, VOO yielded on average 11.94% more per year over the past decade (14.45% vs. 2.51%). The expense ratio of VOO is 0.03 percentage points lower than IGSB’s (0.03% vs. 0.06%).
|Facebook Inc Class A||2.29%|
|Alphabet Inc Class A||2.02%|
|Alphabet Inc Class C||1.97%|
|Berkshire Hathaway Inc Class B||1.44%|
|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%.
|IGSB Bond Sectors||Weight|
IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.
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 IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 IGSB, the end total would have been $12,637. This equates to a $2,637 profit over 10 years and a compound annual growth rate (CAGR) of 2.51%.
VOO’s CAGR is 11.94 percentage points higher than that of IGSB and as a result, would have yielded $23,938 more on a $10,000 investment. Thus, VOO outperformed IGSB by 11.94% annually.
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