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VUG vs. IGSB: What’s The Difference?

The Vanguard Growth Index Fund ETF Shares (VUG) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between VUG and IGSB? And which fund is better?

The expense ratio of VUG is 0.02 percentage points lower than IGSB’s (0.04% vs. 0.06%). VUG also has a high exposure to the technology sector while IGSB is mostly comprised of BBB bonds. Overall, VUG has provided higher returns than IGSB over the past ten years.

In this article, we’ll compare VUG vs. IGSB. We’ll look at risk metrics and annual returns, as well as at their performance and fund composition. Moreover, I’ll also discuss VUG’s and IGSB’s industry exposure, portfolio growth, and holdings and examine how these affect their overall returns.

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Summary

VUGIGSB
NameVanguard Growth Index Fund ETF SharesiShares 1-5 Year Investment Grade Corporate Bond ETF
CategoryLarge GrowthShort-Term Bond
IssuerVanguardiShares
AUM165.53B26.63B
Avg. Return17.58%2.51%
Div. Yield0.57%2.02%
Expense Ratio0.04%0.06%

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 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%.

VUG’s dividend yield is 1.45% lower than that of IGSB (0.57% vs. 2.02%). Also, VUG yielded on average 15.07% more per year over the past decade (17.58% vs. 2.51%). The expense ratio of VUG is 0.02 percentage points lower than IGSB’s (0.04% vs. 0.06%).

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Fund Composition

Holdings

VUG - Holdings

VUG HoldingsWeight
Apple Inc10.13%
Microsoft Corp9.52%
Amazon.com Inc6.88%
Facebook Inc Class A3.89%
Alphabet Inc Class A3.43%
Alphabet Inc Class C3.22%
Tesla Inc2.44%
NVIDIA Corp2.21%
Visa Inc Class A1.78%
PayPal Holdings Inc1.6%

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%.

IGSB - Holdings

IGSB Bond SectorsWeight
BBB50.48%
A40.04%
AA7.46%
AAA2.21%
BB0.09%
Below B0.0%
B0.0%
US Government0.0%
Others-0.28%

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.

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Risk Analysis

VUGIGSB
Mean Return1.440.19
R-squared92.4826.13
Std. Deviation14.762
Alpha1.810.69
Beta1.040.34
Sharpe Ratio1.130.82
Treynor Ratio16.134.82

The Vanguard Growth Index Fund ETF Shares (VUG) has a Treynor Ratio of 16.13 with a Alpha of 1.81 and a R-squared of 92.48. Its Sharpe Ratio is 1.13 while VUG’s Mean Return is 1.44. Furthermore, the fund has a Beta of 1.04 and a Standard Deviation of 14.76.

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Treynor Ratio of 4.82 with a Alpha of 0.69 and a R-squared of 26.13. Its Beta is 0.34 while IGSB’s Standard Deviation is 2. Furthermore, the fund has a Mean Return of 0.19 and a Sharpe Ratio of 0.82.

VUG’s Mean Return is 1.25 points higher than that of IGSB and its R-squared is 66.35 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than IGSB. The Alpha and Beta of VUG are 1.12 points higher and 0.70 points higher than IGSB’s Alpha and Beta.

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Performance

Annual Returns

VUG vs. IGSB - Annual Returns

YearVUGIGSB
202040.16%5.26%
201937.26%7.01%
2018-3.32%1.34%
201727.8%1.41%
20166.13%1.77%
20153.32%0.7%
201413.62%0.74%
201332.38%1.03%
201217.03%3.28%
20111.87%1.34%
201017.11%3.69%

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 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.

Portfolio Growth

VUG vs. IGSB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VUG$10,000$54,73517.58%
IGSB$10,000$13,1032.51%

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 IGSB, the end total would have been $13,103. This equates to a $3,103 profit over 11 years and a compound annual growth rate (CAGR) of 2.51%.

VUG’s CAGR is 15.07 percentage points higher than that of IGSB and as a result, would have yielded $41,632 more on a $10,000 investment. Thus, VUG outperformed IGSB by 15.07% annually.


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