The Vanguard Value Index Fund ETF Shares (VTV) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. VTV is a Vanguard Large Value fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between VTV and HYG? And which fund is better?
The expense ratio of VTV is 0.44 percentage points lower than HYG’s (0.04% vs. 0.48%). VTV also has a high exposure to the financial services sector while HYG is mostly comprised of BB bonds. Overall, VTV has provided higher returns than HYG over the past ten years.
In this article, we’ll compare VTV vs. HYG. We’ll look at performance and portfolio growth, as well as at their risk metrics and industry exposure. Moreover, I’ll also discuss VTV’s and HYG’s holdings, fund composition, and annual returns and examine how these affect their overall returns.
|Name||Vanguard Value Index Fund ETF Shares||iShares iBoxx $ High Yield Corporate Bond ETF|
|Category||Large Value||High Yield Bond|
The Vanguard Value Index Fund ETF Shares (VTV) is a Large Value fund that is issued by Vanguard. It currently has 125.77B total assets under management and has yielded an average annual return of 12.07% over the past 10 years. The fund has a dividend yield of 2.15% with an expense ratio of 0.04%.
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%.
VTV’s dividend yield is 2.29% lower than that of HYG (2.15% vs. 4.44%). Also, VTV yielded on average 5.66% more per year over the past decade (12.07% vs. 6.42%). The expense ratio of VTV is 0.44 percentage points lower than HYG’s (0.04% vs. 0.48%).
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|Berkshire Hathaway Inc Class B||2.98%|
|JPMorgan Chase & Co||2.82%|
|Johnson & Johnson||2.6%|
|UnitedHealth Group Inc||2.27%|
|Procter & Gamble Co||1.98%|
|Bank of America Corp||1.91%|
|Exxon Mobil Corp||1.6%|
|Comcast Corp Class A||1.57%|
|Verizon Communications Inc||1.32%|
VTV’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.98%, 2.82%, 2.6%, 2.27%, and 1.98%.
Bank of America Corp (1.91%), Exxon Mobil Corp (1.6%), and Comcast Corp Class A (1.57%) have a slightly smaller but still significant weight. Intel Corp and Verizon Communications Inc are also represented in the VTV’s holdings at 1.36% and 1.32%.
|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 Value Index Fund ETF Shares (VTV) has a R-squared of 92.61 with a Standard Deviation of 13.78 and a Mean Return of 1.05. Its Beta is 0.98 while VTV’s Alpha is -1.92. Furthermore, the fund has a Sharpe Ratio of 0.87 and a Treynor Ratio of 11.94.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Standard Deviation of 6.96 with a Beta of 0.48 and a R-squared of 4.1. Its Alpha is 3.58 while HYG’s Treynor Ratio is 10.01. Furthermore, the fund has a Sharpe Ratio of 0.7 and a Mean Return of 0.46.
VTV’s Mean Return is 0.59 points higher than that of HYG and its R-squared is 88.51 points higher. With a Standard Deviation of 13.78, VTV is slightly more volatile than HYG. The Alpha and Beta of VTV are 5.50 points lower and 0.50 points higher than HYG’s Alpha and Beta.
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VTV had its best year in 2013 with an annual return of 33.03%. VTV’s worst year over the past decade yielded -5.39% and occurred in 2018. In most years the Vanguard Value Index Fund ETF Shares provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.19%, 14.45%, and 15.19% 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 VTV would have resulted in a final balance of $33,163. This is a profit of $23,163 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.07%.
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%.
VTV’s CAGR is 5.66 percentage points higher than that of HYG and as a result, would have yielded $13,736 more on a $10,000 investment. Thus, VTV outperformed HYG by 5.66% annually.
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