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VUG vs. SHY: What’s The Difference?

The Vanguard Growth Index Fund ETF Shares (VUG) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and SHY is a iShares Short Government fund. So, what’s the difference between VUG and SHY? And which fund is better?

The expense ratio of VUG is 0.11 percentage points lower than SHY’s (0.04% vs. 0.15%). VUG also has a high exposure to the technology sector while SHY is mostly comprised of AAA bonds. Overall, VUG has provided higher returns than SHY over the past ten years.

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

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Summary

VUGSHY
NameVanguard Growth Index Fund ETF SharesiShares 1-3 Year Treasury Bond ETF
CategoryLarge GrowthShort Government
IssuerVanguardiShares
AUM165.53B19.51B
Avg. Return17.58%1.27%
Div. Yield0.57%0.46%
Expense Ratio0.04%0.15%

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 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.

VUG’s dividend yield is 0.11% higher than that of SHY (0.57% vs. 0.46%). Also, VUG yielded on average 16.30% more per year over the past decade (17.58% vs. 1.27%). The expense ratio of VUG is 0.11 percentage points lower than SHY’s (0.04% vs. 0.15%).

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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%.

SHY - Holdings

SHY Bond SectorsWeight
AAA99.67%
Others0.33%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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Risk Analysis

VUGSHY
Mean Return1.440.09
R-squared92.4839.11
Std. Deviation14.760.89
Alpha1.81-0.03
Beta1.040.18
Sharpe Ratio1.130.54
Treynor Ratio16.132.6

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

The iShares 1-3 Year Treasury Bond ETF (SHY) has a Standard Deviation of 0.89 with a Beta of 0.18 and a Alpha of -0.03. Its Treynor Ratio is 2.6 while SHY’s Sharpe Ratio is 0.54. Furthermore, the fund has a Mean Return of 0.09 and a R-squared of 39.11.

VUG’s Mean Return is 1.35 points higher than that of SHY and its R-squared is 53.37 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than SHY. The Alpha and Beta of VUG are 1.84 points higher and 0.86 points higher than SHY’s Alpha and Beta.

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Performance

Annual Returns

VUG vs. SHY - Annual Returns

YearVUGSHY
202040.16%3.01%
201937.26%3.42%
2018-3.32%1.45%
201727.8%0.27%
20166.13%0.75%
20153.32%0.43%
201413.62%0.48%
201332.38%0.23%
201217.03%0.31%
20111.87%1.43%
201017.11%2.23%

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 SHY, returning 3.42% on an annual basis. The poorest year for SHY in the last ten years was 2013, with a yield of 0.23%. Most years the iShares 1-3 Year Treasury Bond ETF has given investors modest returns, such as in 2014, 2016, and 2011, when gains were 0.48%, 0.75%, and 1.43% respectively.

Portfolio Growth

VUG vs. SHY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VUG$10,000$54,73517.58%
SHY$10,000$11,4861.27%

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 SHY, the end total would have been $11,486. This equates to a $1,486 profit over 11 years and a compound annual growth rate (CAGR) of 1.27%.

VUG’s CAGR is 16.30 percentage points higher than that of SHY and as a result, would have yielded $43,249 more on a $10,000 investment. Thus, VUG outperformed SHY by 16.30% annually.


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