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.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
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%).
FYI: The best way I've found to invest is through M1 Finance. It's free and you even get an instant line of credit and 100$! Have a look here (link to M1 Finance).
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.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
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.
Current recommendations:
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.
I believe that money is just a means to an end: to be free to spend your time as you wish, to maximize your positive impact on the world.
