The Vanguard Total Stock Market Index Fund ETF Shares (VTI) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. VTI is a Vanguard Large Blend fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between VTI and HYG? And which fund is better?
The expense ratio of VTI is 0.45 percentage points lower than HYG’s (0.03% vs. 0.48%). VTI also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, VTI has provided higher returns than HYG over the past ten years.
In this article, we’ll compare VTI vs. HYG. We’ll look at industry exposure and risk metrics, as well as at their portfolio growth and annual returns. Moreover, I’ll also discuss VTI’s and HYG’s fund composition, holdings, and performance and examine how these affect their overall returns.
|Name||Vanguard Total Stock Market Index Fund ETF Shares||iShares iBoxx $ High Yield Corporate Bond ETF|
|Category||Large Blend||High Yield Bond|
The Vanguard Total Stock Market Index Fund ETF Shares (VTI) is a Large Blend fund that is issued by Vanguard. It currently has 1.26T total assets under management and has yielded an average annual return of 14.70% over the past 10 years. The fund has a dividend yield of 1.26% 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%.
VTI’s dividend yield is 3.18% lower than that of HYG (1.26% vs. 4.44%). Also, VTI yielded on average 8.28% more per year over the past decade (14.70% vs. 6.42%). The expense ratio of VTI is 0.45 percentage points lower than HYG’s (0.03% vs. 0.48%).
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|Facebook Inc Class A||1.88%|
|Alphabet Inc Class A||1.66%|
|Alphabet Inc Class C||1.56%|
|Berkshire Hathaway Inc Class B||1.09%|
|JPMorgan Chase & Co||1.06%|
VTI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 4.9%, 4.6%, 3.33%, 1.88%, and 1.66%.
Alphabet Inc Class C (1.56%), Tesla Inc (1.18%), and Berkshire Hathaway Inc Class B (1.09%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VTI’s holdings at 1.07% and 1.06%.
|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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VTI had its best year in 2013 with an annual return of 33.51%. VTI’s worst year over the past decade yielded -5.13% and occurred in 2018. In most years the Vanguard Total Stock Market Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2010 where annual returns amounted to 12.68%, 16.41%, and 17.26% 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 VTI would have resulted in a final balance of $42,648. This is a profit of $32,648 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.70%.
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%.
VTI’s CAGR is 8.28 percentage points higher than that of HYG and as a result, would have yielded $23,221 more on a $10,000 investment. Thus, VTI outperformed HYG by 8.28% annually.
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