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VXUS vs. HYG: What’s The Difference?

The Vanguard Total International Stock Index Fund ETF Shares (VXUS) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. VXUS is a Vanguard Foreign Large Blend fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between VXUS and HYG? And which fund is better?

The expense ratio of VXUS is 0.40 percentage points lower than HYG’s (0.08% vs. 0.48%). VXUS also has a high exposure to the financial services sector while HYG is mostly comprised of BB bonds. Overall, VXUS has provided higher returns than HYG over the past ten years.

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

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Summary

VXUSHYG
NameVanguard Total International Stock Index Fund ETF SharesiShares iBoxx $ High Yield Corporate Bond ETF
CategoryForeign Large BlendHigh Yield Bond
IssuerVanguardiShares
AUM404.73B20.03B
Avg. Return8.41%6.42%
Div. Yield2.44%4.44%
Expense Ratio0.08%0.48%

The Vanguard Total International Stock Index Fund ETF Shares (VXUS) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 404.73B total assets under management and has yielded an average annual return of 8.41% over the past 10 years. The fund has a dividend yield of 2.44% with an expense ratio of 0.08%.

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%.

VXUS’s dividend yield is 2.00% lower than that of HYG (2.44% vs. 4.44%). Also, VXUS yielded on average 1.99% more per year over the past decade (8.41% vs. 6.42%). The expense ratio of VXUS is 0.40 percentage points lower than HYG’s (0.08% vs. 0.48%).

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Fund Composition

Holdings

VXUS - Holdings

VXUS HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd1.62%
Tencent Holdings Ltd1.41%
Alibaba Group Holding Ltd Ordinary Shares1.26%
Nestle SA1.1%
Samsung Electronics Co Ltd1.05%
ASML Holding NV0.86%
Roche Holding AG0.81%
Toyota Motor Corp0.67%
LVMH Moet Hennessy Louis Vuitton SE0.61%
Novartis AG0.6%

VXUS’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, and Samsung Electronics Co Ltd at 1.62%, 1.41%, 1.26%, 1.1%, and 1.05%.

ASML Holding NV (0.86%), Roche Holding AG (0.81%), and Toyota Motor Corp (0.67%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VXUS’s holdings at 0.61% and 0.6%.

HYG - Holdings

HYG Bond SectorsWeight
BB56.53%
B31.27%
Below B11.4%
BBB0.61%
AAA0.28%
A0.0%
AA0.0%
US Government0.0%
Others-0.09%

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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Risk Analysis

VXUSHYG
Mean Return0.560.46
R-squared98.394.1
Std. Deviation15.126.96
Alpha0.313.58
Beta0.990.48
Sharpe Ratio0.40.7
Treynor Ratio5.1410.01

The Vanguard Total International Stock Index Fund ETF Shares (VXUS) has a R-squared of 98.39 with a Alpha of 0.31 and a Beta of 0.99. Its Sharpe Ratio is 0.4 while VXUS’s Standard Deviation is 15.12. Furthermore, the fund has a Treynor Ratio of 5.14 and a Mean Return of 0.56.

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Standard Deviation of 6.96 with a R-squared of 4.1 and a Treynor Ratio of 10.01. Its Sharpe Ratio is 0.7 while HYG’s Alpha is 3.58. Furthermore, the fund has a Mean Return of 0.46 and a Beta of 0.48.

VXUS’s Mean Return is 0.10 points higher than that of HYG and its R-squared is 94.29 points higher. With a Standard Deviation of 15.12, VXUS is slightly more volatile than HYG. The Alpha and Beta of VXUS are 3.27 points lower and 0.51 points higher than HYG’s Alpha and Beta.

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Performance

Annual Returns

VXUS vs. HYG - Annual Returns

YearVXUSHYG
202011.32%4.12%
201921.58%14.23%
2018-14.42%-1.93%
201727.52%6.09%
20164.72%13.92%
2015-4.28%-5.55%
2014-4.17%2.0%
201315.16%5.9%
201218.22%13.83%
20110.0%5.89%
20100.0%12.07%

VXUS had its best year in 2017 with an annual return of 27.52%. VXUS’s worst year over the past decade yielded -14.42% and occurred in 2018. In most years the Vanguard Total International Stock Index Fund ETF Shares provided moderate returns such as in 2010, 2016, and 2020 where annual returns amounted to 0.0%, 4.72%, and 11.32% 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.

Portfolio Growth

VXUS vs. HYG - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VXUS$10,000$19,3158.41%
HYG$10,000$16,3716.42%

A $10,000 investment in VXUS would have resulted in a final balance of $19,315. This is a profit of $9,315 over 9 years and amounts to a compound annual growth rate (CAGR) of 8.41%.

With a $10,000 investment in HYG, the end total would have been $16,371. This equates to a $6,371 profit over 9 years and a compound annual growth rate (CAGR) of 6.42%.

VXUS’s CAGR is 1.99 percentage points higher than that of HYG and as a result, would have yielded $2,944 more on a $10,000 investment. Thus, VXUS outperformed HYG by 1.99% annually.


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