The iShares Russell 2000 ETF (IWM) and the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and VCIT is a Vanguard Corporate Bond fund. So, what’s the difference between IWM and VCIT? And which fund is better?
The expense ratio of IWM is 0.14 percentage points higher than VCIT’s (0.19% vs. 0.05%). IWM also has a high exposure to the healthcare sector while VCIT is mostly comprised of BBB bonds. Overall, IWM has provided higher returns than VCIT over the past ten years.
In this article, we’ll compare IWM vs. VCIT. We’ll look at annual returns and industry exposure, as well as at their holdings and risk metrics. Moreover, I’ll also discuss IWM’s and VCIT’s performance, fund composition, and portfolio growth and examine how these affect their overall returns.
Summary
| IWM | VCIT | |
| Name | iShares Russell 2000 ETF | Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares |
| Category | Small Blend | Corporate Bond |
| Issuer | iShares | Vanguard |
| AUM | 66.48B | 48.39B |
| Avg. Return | 13.52% | 5.84% |
| Div. Yield | 0.86% | 2.33% |
| Expense Ratio | 0.19% | 0.05% |
The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.
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%.
IWM’s dividend yield is 1.47% lower than that of VCIT (0.86% vs. 2.33%). Also, IWM yielded on average 7.68% more per year over the past decade (13.52% vs. 5.84%). The expense ratio of IWM is 0.14 percentage points higher than VCIT’s (0.19% vs. 0.05%).
Fund Composition
Holdings
| IWM Holdings | Weight |
| AMC Entertainment Holdings Inc Class A | 0.52% |
| Intellia Therapeutics Inc | 0.33% |
| Crocs Inc | 0.3% |
| BlackRock Cash Funds Treasury SL Agency | 0.29% |
| Tenet Healthcare Corp | 0.26% |
| Lattice Semiconductor Corp | 0.26% |
| Tetra Tech Inc | 0.25% |
| II-VI Inc | 0.25% |
| EastGroup Properties Inc | 0.24% |
| Arrowhead Pharmaceuticals Inc | 0.24% |
IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.
Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.
| VCIT Bond Sectors | Weight |
| BBB | 55.28% |
| A | 37.85% |
| AA | 5.22% |
| AAA | 1.57% |
| Below B | 0.08% |
| Others | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| US Government | 0.0% |
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.
Risk Analysis
| IWM | VCIT | |
| Mean Return | 1.12 | 0.44 |
| R-squared | 77.73 | 63.18 |
| Std. Deviation | 18.87 | 5.08 |
| Alpha | -5.12 | 0.89 |
| Beta | 1.23 | 1.35 |
| Sharpe Ratio | 0.68 | 0.91 |
| Treynor Ratio | 9.56 | 3.43 |
The iShares Russell 2000 ETF (IWM) has a Mean Return of 1.12 with a Beta of 1.23 and a Alpha of -5.12. Its Sharpe Ratio is 0.68 while IWM’s Treynor Ratio is 9.56. Furthermore, the fund has a R-squared of 77.73 and a Standard Deviation of 18.87.
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Standard Deviation of 5.08 with a Mean Return of 0.44 and a Sharpe Ratio of 0.91. Its Treynor Ratio is 3.43 while VCIT’s Alpha is 0.89. Furthermore, the fund has a Beta of 1.35 and a R-squared of 63.18.
IWM’s Mean Return is 0.68 points higher than that of VCIT and its R-squared is 14.55 points higher. With a Standard Deviation of 18.87, IWM is slightly more volatile than VCIT. The Alpha and Beta of IWM are 6.01 points lower and 0.12 points lower than VCIT’s Alpha and Beta.
Performance
Annual Returns
| Year | IWM | VCIT |
| 2020 | 19.89% | 9.55% |
| 2019 | 25.42% | 13.97% |
| 2018 | -11.02% | -1.75% |
| 2017 | 14.66% | 5.5% |
| 2016 | 21.36% | 5.3% |
| 2015 | -4.33% | 0.88% |
| 2014 | 4.94% | 7.47% |
| 2013 | 38.85% | -1.8% |
| 2012 | 16.39% | 11.36% |
| 2011 | -4.19% | 7.94% |
| 2010 | 26.76% | 10.65% |
IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% 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.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| IWM | $10,000 | $28,941 | 13.52% |
| VCIT | $10,000 | $17,439 | 5.84% |
A $10,000 investment in IWM would have resulted in a final balance of $28,941. This is a profit of $18,941 over 10 years and amounts to a compound annual growth rate (CAGR) of 13.52%.
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%.
IWM’s CAGR is 7.68 percentage points higher than that of VCIT and as a result, would have yielded $11,502 more on a $10,000 investment. Thus, IWM outperformed VCIT by 7.68% annually.
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