The Vanguard Total World Stock Index Fund ETF Shares (VT) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. VT is a Vanguard N/A fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between VT and HYG? And which fund is better?
The expense ratio of VT is 0.40 percentage points lower than HYG’s (0.08% vs. 0.48%). VT also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, VT has provided higher returns than HYG over the past 11 years.
In this article, we’ll compare VT vs. HYG. We’ll look at portfolio growth and annual returns, as well as at their fund composition and holdings. Moreover, I’ll also discuss VT’s and HYG’s performance, industry exposure, and risk metrics and examine how these affect their overall returns.
|Name||Vanguard Total World Stock Index Fund ETF Shares||iShares iBoxx $ High Yield Corporate Bond ETF|
|Category||N/A||High Yield Bond|
The Vanguard Total World Stock Index Fund ETF Shares (VT) is a N/A fund that is issued by Vanguard. It currently has 30.44B total assets under management and has yielded an average annual return of 10.42% over the past 10 years. The fund has a dividend yield of 1.65% with an expense ratio of 0.08%.
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%.
VT’s dividend yield is 2.79% lower than that of HYG (1.65% vs. 4.44%). Also, VT yielded on average 4.00% more per year over the past decade (10.42% vs. 6.42%). The expense ratio of VT is 0.40 percentage points lower than HYG’s (0.08% vs. 0.48%).
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|Facebook Inc Class A||1.1%|
|Alphabet Inc Class A||0.97%|
|Alphabet Inc Class C||0.95%|
|JPMorgan Chase & Co||0.62%|
|Tencent Holdings Ltd||0.6%|
VT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 2.85%, 2.71%, 1.98%, 1.1%, and 0.97%.
Alphabet Inc Class C (0.95%), Tesla Inc (0.7%), and NVIDIA Corp (0.64%) have a slightly smaller but still significant weight. JPMorgan Chase & Co and Tencent Holdings Ltd are also represented in the VT’s holdings at 0.62% and 0.6%.
|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 Total World Stock Index Fund ETF Shares (VT) has a Alpha of 0.2 with a Treynor Ratio of 9.5 and a R-squared of 99.35. Its Mean Return is 0.9 while VT’s Sharpe Ratio is 0.71. Furthermore, the fund has a Beta of 1.01 and a Standard Deviation of 14.19.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Beta of 0.48 with a Alpha of 3.58 and a Mean Return of 0.46. Its Standard Deviation is 6.96 while HYG’s Treynor Ratio is 10.01. Furthermore, the fund has a Sharpe Ratio of 0.7 and a R-squared of 4.1.
VT’s Mean Return is 0.44 points higher than that of HYG and its R-squared is 95.25 points higher. With a Standard Deviation of 14.19, VT is slightly more volatile than HYG. The Alpha and Beta of VT are 3.38 points lower and 0.53 points higher than HYG’s Alpha and Beta.
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VT had its best year in 2019 with an annual return of 26.8%. VT’s worst year over the past decade yielded -9.67% and occurred in 2018. In most years the Vanguard Total World Stock Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 8.77%, 13.05%, and 16.74% 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 VT would have resulted in a final balance of $27,739. This is a profit of $17,739 over 11 years and amounts to a compound annual growth rate (CAGR) of 10.42%.
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%.
VT’s CAGR is 4.00 percentage points higher than that of HYG and as a result, would have yielded $8,312 more on a $10,000 investment. Thus, VT outperformed HYG by 4.00% annually.
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