The iShares Russell 1000 Value ETF (IWD) and the Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) are both among the Top 100 ETFs. IWD is a iShares Large Value fund and VCSH is a Vanguard Short-Term Bond fund. So, what’s the difference between IWD and VCSH? And which fund is better?
The expense ratio of IWD is 0.14 percentage points higher than VCSH’s (0.19% vs. 0.05%). IWD also has a high exposure to the financial services sector while VCSH is mostly comprised of BBB bonds. Overall, IWD has provided higher returns than VCSH over the past ten years.
In this article, we’ll compare IWD vs. VCSH. We’ll look at holdings and portfolio growth, as well as at their risk metrics and industry exposure. Moreover, I’ll also discuss IWD’s and VCSH’s annual returns, performance, and fund composition and examine how these affect their overall returns.
Summary
| IWD | VCSH | |
| Name | iShares Russell 1000 Value ETF | Vanguard Short-Term Corporate Bond Index Fund ETF Shares |
| Category | Large Value | Short-Term Bond |
| Issuer | iShares | Vanguard |
| AUM | 54.1B | 47.88B |
| Avg. Return | 11.40% | 3.12% |
| Div. Yield | 1.57% | 1.89% |
| Expense Ratio | 0.19% | 0.05% |
The iShares Russell 1000 Value ETF (IWD) is a Large Value fund that is issued by iShares. It currently has 54.1B total assets under management and has yielded an average annual return of 11.40% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.19%.
The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) is a Short-Term Bond fund that is issued by Vanguard. It currently has 47.88B total assets under management and has yielded an average annual return of 3.12% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.05%.
IWD’s dividend yield is 0.32% lower than that of VCSH (1.57% vs. 1.89%). Also, IWD yielded on average 8.28% more per year over the past decade (11.40% vs. 3.12%). The expense ratio of IWD is 0.14 percentage points higher than VCSH’s (0.19% vs. 0.05%).
Fund Composition
Holdings
| IWD Holdings | Weight |
| Berkshire Hathaway Inc Class B | 2.58% |
| JPMorgan Chase & Co | 2.25% |
| Johnson & Johnson | 2.24% |
| UnitedHealth Group Inc | 1.78% |
| Procter & Gamble Co | 1.71% |
| The Walt Disney Co | 1.5% |
| Bank of America Corp | 1.43% |
| Comcast Corp Class A | 1.33% |
| Exxon Mobil Corp | 1.2% |
| Pfizer Inc | 1.18% |
IWD’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.58%, 2.25%, 2.24%, 1.78%, and 1.71%.
The Walt Disney Co (1.5%), Bank of America Corp (1.43%), and Comcast Corp Class A (1.33%) have a slightly smaller but still significant weight. Exxon Mobil Corp and Pfizer Inc are also represented in the IWD’s holdings at 1.2% and 1.18%.
| VCSH Bond Sectors | Weight |
| BBB | 47.49% |
| A | 43.06% |
| AA | 8.45% |
| AAA | 0.95% |
| Below B | 0.03% |
| Others | 0.02% |
| B | 0.0% |
| BB | 0.0% |
| US Government | 0.0% |
VCSH’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 47.49%, 43.06%, 8.45%, 0.95%, and 0.03%. The fund is less weighted towards Others (0.02%), B (0.0%), and BB (0.0%) rated bonds.
Risk Analysis
| IWD | VCSH | |
| Mean Return | 1.03 | 0.24 |
| R-squared | 92.38 | 37.53 |
| Std. Deviation | 14.35 | 2.34 |
| Alpha | -3.23 | 0.93 |
| Beta | 1.02 | 0.48 |
| Sharpe Ratio | 0.81 | 0.97 |
| Treynor Ratio | 11.06 | 4.75 |
The iShares Russell 1000 Value ETF (IWD) has a Treynor Ratio of 11.06 with a R-squared of 92.38 and a Standard Deviation of 14.35. Its Alpha is -3.23 while IWD’s Mean Return is 1.03. Furthermore, the fund has a Sharpe Ratio of 0.81 and a Beta of 1.02.
The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) has a Mean Return of 0.24 with a Beta of 0.48 and a Standard Deviation of 2.34. Its Alpha is 0.93 while VCSH’s R-squared is 37.53. Furthermore, the fund has a Treynor Ratio of 4.75 and a Sharpe Ratio of 0.97.
IWD’s Mean Return is 0.79 points higher than that of VCSH and its R-squared is 54.85 points higher. With a Standard Deviation of 14.35, IWD is slightly more volatile than VCSH. The Alpha and Beta of IWD are 4.16 points lower and 0.54 points higher than VCSH’s Alpha and Beta.
Performance
Annual Returns
| Year | IWD | VCSH |
| 2020 | 2.67% | 5.08% |
| 2019 | 26.34% | 6.85% |
| 2018 | -8.4% | 0.91% |
| 2017 | 13.47% | 2.45% |
| 2016 | 17.09% | 2.63% |
| 2015 | -3.95% | 1.25% |
| 2014 | 13.21% | 1.96% |
| 2013 | 32.18% | 1.37% |
| 2012 | 17.28% | 5.74% |
| 2011 | 0.21% | 2.94% |
| 2010 | 15.3% | 5.51% |
IWD had its best year in 2013 with an annual return of 32.18%. IWD’s worst year over the past decade yielded -8.4% and occurred in 2018. In most years the iShares Russell 1000 Value ETF provided moderate returns such as in 2014, 2017, and 2010 where annual returns amounted to 13.21%, 13.47%, and 15.3% respectively.
The year 2019 was the strongest year for VCSH, returning 6.85% on an annual basis. The poorest year for VCSH in the last ten years was 2018, with a yield of 0.91%. Most years the Vanguard Short-Term Corporate Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2016, and 2011, when gains were 2.45%, 2.63%, and 2.94% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| IWD | $10,000 | $26,666 | 11.40% |
| VCSH | $10,000 | $13,569 | 3.12% |
A $10,000 investment in IWD would have resulted in a final balance of $26,666. This is a profit of $16,666 over 10 years and amounts to a compound annual growth rate (CAGR) of 11.40%.
With a $10,000 investment in VCSH, the end total would have been $13,569. This equates to a $3,569 profit over 10 years and a compound annual growth rate (CAGR) of 3.12%.
IWD’s CAGR is 8.28 percentage points higher than that of VCSH and as a result, would have yielded $13,097 more on a $10,000 investment. Thus, IWD outperformed VCSH by 8.28% annually.
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