The Vanguard Total Bond Market Index Fund ETF Shares (BND) and the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) are both among the Top 100 ETFs. BND is a Vanguard Intermediate-Term Bond fund and VCIT is a Vanguard Corporate Bond fund. So, what’s the difference between BND and VCIT? And which fund is better?
The expense ratio of BND is 0.02 percentage points lower than VCIT’s (0.03% vs. 0.05%). BND is mostly comprised of AAA bonds and VCIT has a high exposure to BBB bond. Overall, BND has provided lower returns than VCIT over the past ten years.
In this article, we’ll compare BND vs. VCIT. We’ll look at risk metrics and annual returns, as well as at their industry exposure and performance. Moreover, I’ll also discuss BND’s and VCIT’s holdings, portfolio growth, and fund composition and examine how these affect their overall returns.
|Name||Vanguard Total Bond Market Index Fund ETF Shares||Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares|
|Category||Intermediate-Term Bond||Corporate Bond|
The Vanguard Total Bond Market Index Fund ETF Shares (BND) is a Intermediate-Term Bond fund that is issued by Vanguard. It currently has 312.15B total assets under management and has yielded an average annual return of 4.09% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.03%.
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) is a Corporate Bond fund that is issued by Vanguard. It currently has 48.39B total assets under management and has yielded an average annual return of 5.84% over the past 10 years. The fund has a dividend yield of 2.33% with an expense ratio of 0.05%.
BND’s dividend yield is 0.31% lower than that of VCIT (2.02% vs. 2.33%). Also, BND yielded on average 1.75% less per year over the past decade (4.09% vs. 5.84%). The expense ratio of BND is 0.02 percentage points lower than VCIT’s (0.03% vs. 0.05%).
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|BND Bond Sectors||Weight|
BND’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Below B at 68.72%, 16.17%, 11.87%, 3.34%, and 0.01%. The fund is less weighted towards B (0.0%), BB (0.0%), and US Government (0.0%) rated bonds.
|VCIT Bond Sectors||Weight|
VCIT’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 55.28%, 37.85%, 5.22%, 1.57%, and 0.08%. The fund is less weighted towards Others (0.0%), B (0.0%), and BB (0.0%) rated bonds.
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The Vanguard Total Bond Market Index Fund ETF Shares (BND) has a Standard Deviation of 3.14 with a Sharpe Ratio of 0.88 and a R-squared of 99.34. Its Treynor Ratio is 2.64 while BND’s Beta is 1.04. Furthermore, the fund has a Alpha of -0.14 and a Mean Return of 0.28.
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Treynor Ratio of 3.43 with a Alpha of 0.89 and a Mean Return of 0.44. Its Sharpe Ratio is 0.91 while VCIT’s Beta is 1.35. Furthermore, the fund has a Standard Deviation of 5.08 and a R-squared of 63.18.
BND’s Mean Return is 0.16 points lower than that of VCIT and its R-squared is 36.16 points higher. With a Standard Deviation of 3.14, BND is slightly less volatile than VCIT. The Alpha and Beta of BND are 1.03 points lower and 0.31 points lower than VCIT’s Alpha and Beta.
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BND had its best year in 2019 with an annual return of 8.71%. BND’s worst year over the past decade yielded -2.14% and occurred in 2013. In most years the Vanguard Total Bond Market Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2014 where annual returns amounted to 3.62%, 4.04%, and 5.96% respectively.
The year 2019 was the strongest year for VCIT, returning 13.97% on an annual basis. The poorest year for VCIT in the last ten years was 2013, with a yield of -1.8%. Most years the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2014, and 2011, when gains were 5.5%, 7.47%, and 7.94% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in BND would have resulted in a final balance of $14,511. This is a profit of $4,511 over 10 years and amounts to a compound annual growth rate (CAGR) of 4.09%.
With a $10,000 investment in VCIT, the end total would have been $17,439. This equates to a $7,439 profit over 10 years and a compound annual growth rate (CAGR) of 5.84%.
BND’s CAGR is 1.75 percentage points lower than that of VCIT and as a result, would have yielded $2,928 less on a $10,000 investment. Thus, BND performed worse than VCIT by 1.75% annually.
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