IWM vs. VCSH: What’s The Difference?

The iShares Russell 2000 ETF (IWM) and the Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and VCSH is a Vanguard Short-Term Bond fund. So, what’s the difference between IWM and VCSH? And which fund is better?

The expense ratio of IWM is 0.14 percentage points higher than VCSH’s (0.19% vs. 0.05%). IWM also has a high exposure to the healthcare sector while VCSH is mostly comprised of BBB bonds. Overall, IWM has provided higher returns than VCSH over the past ten years.

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

Summary

IWM VCSH
Name iShares Russell 2000 ETF Vanguard Short-Term Corporate Bond Index Fund ETF Shares
Category Small Blend Short-Term Bond
Issuer iShares Vanguard
AUM 66.48B 47.88B
Avg. Return 13.52% 3.12%
Div. Yield 0.86% 1.89%
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 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%.

IWM’s dividend yield is 1.03% lower than that of VCSH (0.86% vs. 1.89%). Also, IWM yielded on average 10.40% more per year over the past decade (13.52% vs. 3.12%). The expense ratio of IWM is 0.14 percentage points higher than VCSH’s (0.19% vs. 0.05%).

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Fund Composition

Holdings

IWM - 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%.

VCSH - Holdings

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.

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Risk Analysis

IWM VCSH
Mean Return 1.12 0.24
R-squared 77.73 37.53
Std. Deviation 18.87 2.34
Alpha -5.12 0.93
Beta 1.23 0.48
Sharpe Ratio 0.68 0.97
Treynor Ratio 9.56 4.75

The iShares Russell 2000 ETF (IWM) has a Mean Return of 1.12 with a Standard Deviation of 18.87 and a Alpha of -5.12. Its R-squared is 77.73 while IWM’s Beta is 1.23. Furthermore, the fund has a Sharpe Ratio of 0.68 and a Treynor Ratio of 9.56.

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) has a Beta of 0.48 with a Standard Deviation of 2.34 and a Sharpe Ratio of 0.97. Its Treynor Ratio is 4.75 while VCSH’s R-squared is 37.53. Furthermore, the fund has a Mean Return of 0.24 and a Alpha of 0.93.

IWM’s Mean Return is 0.88 points higher than that of VCSH and its R-squared is 40.20 points higher. With a Standard Deviation of 18.87, IWM is slightly more volatile than VCSH. The Alpha and Beta of IWM are 6.05 points lower and 0.75 points higher than VCSH’s Alpha and Beta.

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Performance

Annual Returns

IWM vs. VCSH - Annual Returns

Year IWM VCSH
2020 19.89% 5.08%
2019 25.42% 6.85%
2018 -11.02% 0.91%
2017 14.66% 2.45%
2016 21.36% 2.63%
2015 -4.33% 1.25%
2014 4.94% 1.96%
2013 38.85% 1.37%
2012 16.39% 5.74%
2011 -4.19% 2.94%
2010 26.76% 5.51%

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 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

IWM vs. VCSH - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWM $10,000 $28,941 13.52%
VCSH $10,000 $13,569 3.12%

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 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%.

IWM’s CAGR is 10.40 percentage points higher than that of VCSH and as a result, would have yielded $15,372 more on a $10,000 investment. Thus, IWM outperformed VCSH by 10.40% annually.


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