VYM vs. IGSB: What’s The Difference?

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

VYM and IGSB have the same expense ratio: 0.06%. VYM also has a high exposure to the financial services sector while IGSB is mostly comprised of BBB bonds. Overall, VYM has provided higher returns than IGSB over the past ten years.

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

Summary

VYM IGSB
Name Vanguard High Dividend Yield Index Fund ETF Shares iShares 1-5 Year Investment Grade Corporate Bond ETF
Category Large Value Short-Term Bond
Issuer Vanguard iShares
AUM 48.5B 26.63B
Avg. Return 12.20% 2.51%
Div. Yield 2.79% 2.02%
Expense Ratio 0.06% 0.06%

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) is a Large Value fund that is issued by Vanguard. It currently has 48.5B total assets under management and has yielded an average annual return of 12.20% over the past 10 years. The fund has a dividend yield of 2.79% with an expense ratio of 0.06%.

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%.

VYM’s dividend yield is 0.77% higher than that of IGSB (2.79% vs. 2.02%). Also, VYM yielded on average 9.69% more per year over the past decade (12.20% vs. 2.51%). VYM and IGSB have the same expense ratio: 0.06%.

Fund Composition

Holdings

VYM - Holdings

VYM Holdings Weight
JPMorgan Chase & Co 3.53%
Johnson & Johnson 3.28%
The Home Depot Inc 2.59%
Procter & Gamble Co 2.48%
Bank of America Corp 2.35%
Exxon Mobil Corp 2.02%
Comcast Corp Class A 1.96%
Verizon Communications Inc 1.75%
Intel Corp 1.71%
Cisco Systems Inc 1.69%

VYM’s Top Holdings are JPMorgan Chase & Co, Johnson & Johnson, The Home Depot Inc, Procter & Gamble Co, and Bank of America Corp at 3.53%, 3.28%, 2.59%, 2.48%, and 2.35%.

Exxon Mobil Corp (2.02%), Comcast Corp Class A (1.96%), and Verizon Communications Inc (1.75%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the VYM’s holdings at 1.71% and 1.69%.

IGSB - Holdings

IGSB Bond Sectors Weight
BBB 50.48%
A 40.04%
AA 7.46%
AAA 2.21%
BB 0.09%
Below B 0.0%
B 0.0%
US Government 0.0%
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.

Risk Analysis

VYM IGSB
Mean Return 1.04 0.19
R-squared 88.88 26.13
Std. Deviation 12.69 2
Alpha -0.7 0.69
Beta 0.88 0.34
Sharpe Ratio 0.93 0.82
Treynor Ratio 13.24 4.82

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a Treynor Ratio of 13.24 with a Standard Deviation of 12.69 and a R-squared of 88.88. Its Beta is 0.88 while VYM’s Sharpe Ratio is 0.93. Furthermore, the fund has a Alpha of -0.7 and a Mean Return of 1.04.

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

VYM’s Mean Return is 0.85 points higher than that of IGSB and its R-squared is 62.75 points higher. With a Standard Deviation of 12.69, VYM is slightly more volatile than IGSB. The Alpha and Beta of VYM are 1.39 points lower and 0.54 points higher than IGSB’s Alpha and Beta.

Performance

Annual Returns

VYM vs. IGSB - Annual Returns

Year VYM IGSB
2020 1.14% 5.26%
2019 24.2% 7.01%
2018 -5.87% 1.34%
2017 16.42% 1.41%
2016 16.87% 1.77%
2015 0.33% 0.7%
2014 13.47% 0.74%
2013 30.26% 1.03%
2012 12.68% 3.28%
2011 10.5% 1.34%
2010 14.17% 3.69%

VYM had its best year in 2013 with an annual return of 30.26%. VYM’s worst year over the past decade yielded -5.87% and occurred in 2018. In most years the Vanguard High Dividend Yield Index Fund ETF Shares provided moderate returns such as in 2012, 2014, and 2010 where annual returns amounted to 12.68%, 13.47%, and 14.17% 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

VYM vs. IGSB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VYM $10,000 $33,914 12.20%
IGSB $10,000 $13,103 2.51%

A $10,000 investment in VYM would have resulted in a final balance of $33,914. This is a profit of $23,914 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.20%.

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%.

VYM’s CAGR is 9.69 percentage points higher than that of IGSB and as a result, would have yielded $20,811 more on a $10,000 investment. Thus, VYM outperformed IGSB by 9.69% annually.


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