The Vanguard Growth Index Fund ETF Shares (VUG) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between VUG and HYG? And which fund is better?
The expense ratio of VUG is 0.44 percentage points lower than HYG’s (0.04% vs. 0.48%). VUG also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, VUG has provided higher returns than HYG over the past ten years.
In this article, we’ll compare VUG vs. HYG. We’ll look at risk metrics and performance, as well as at their holdings and industry exposure. Moreover, I’ll also discuss VUG’s and HYG’s fund composition, portfolio growth, and annual returns and examine how these affect their overall returns.
|Name||Vanguard Growth Index Fund ETF Shares||iShares iBoxx $ High Yield Corporate Bond ETF|
|Category||Large Growth||High Yield Bond|
The Vanguard Growth Index Fund ETF Shares (VUG) is a Large Growth fund that is issued by Vanguard. It currently has 165.53B total assets under management and has yielded an average annual return of 17.58% over the past 10 years. The fund has a dividend yield of 0.57% 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%.
VUG’s dividend yield is 3.87% lower than that of HYG (0.57% vs. 4.44%). Also, VUG yielded on average 11.16% more per year over the past decade (17.58% vs. 6.42%). The expense ratio of VUG is 0.44 percentage points lower than HYG’s (0.04% vs. 0.48%).
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|Facebook Inc Class A||3.89%|
|Alphabet Inc Class A||3.43%|
|Alphabet Inc Class C||3.22%|
|Visa Inc Class A||1.78%|
|PayPal Holdings Inc||1.6%|
VUG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.13%, 9.52%, 6.88%, 3.89%, and 3.43%.
Alphabet Inc Class C (3.22%), Tesla Inc (2.44%), and NVIDIA Corp (2.21%) have a slightly smaller but still significant weight. Visa Inc Class A and PayPal Holdings Inc are also represented in the VUG’s holdings at 1.78% and 1.6%.
|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 Growth Index Fund ETF Shares (VUG) has a Treynor Ratio of 16.13 with a Sharpe Ratio of 1.13 and a Beta of 1.04. Its Standard Deviation is 14.76 while VUG’s Mean Return is 1.44. Furthermore, the fund has a Alpha of 1.81 and a R-squared of 92.48.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Standard Deviation of 6.96 with a Alpha of 3.58 and a Mean Return of 0.46. Its Sharpe Ratio is 0.7 while HYG’s R-squared is 4.1. Furthermore, the fund has a Beta of 0.48 and a Treynor Ratio of 10.01.
VUG’s Mean Return is 0.98 points higher than that of HYG and its R-squared is 88.38 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than HYG. The Alpha and Beta of VUG are 1.77 points lower and 0.56 points higher than HYG’s Alpha and Beta.
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VUG had its best year in 2020 with an annual return of 40.16%. VUG’s worst year over the past decade yielded -3.32% and occurred in 2018. In most years the Vanguard Growth Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 13.62%, 17.03%, and 17.11% 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 VUG would have resulted in a final balance of $54,735. This is a profit of $44,735 over 11 years and amounts to a compound annual growth rate (CAGR) of 17.58%.
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%.
VUG’s CAGR is 11.16 percentage points higher than that of HYG and as a result, would have yielded $35,308 more on a $10,000 investment. Thus, VUG outperformed HYG by 11.16% annually.
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