The Vanguard Small-Cap Index Fund ETF Shares (VB) and the Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) are both among the Top 100 ETFs. VB is a Vanguard Small Blend fund and VCSH is a Vanguard Short-Term Bond fund. So, what’s the difference between VB and VCSH? And which fund is better?
VB and VCSH have the same expense ratio: 0.05%. VB also has a high exposure to the technology sector while VCSH is mostly comprised of BBB bonds. Overall, VB has provided higher returns than VCSH over the past ten years.
In this article, we’ll compare VB vs. VCSH. We’ll look at holdings and portfolio growth, as well as at their industry exposure and risk metrics. Moreover, I’ll also discuss VB’s and VCSH’s annual returns, performance, and fund composition and examine how these affect their overall returns.
Summary
| VB | VCSH | |
| Name | Vanguard Small-Cap Index Fund ETF Shares | Vanguard Short-Term Corporate Bond Index Fund ETF Shares |
| Category | Small Blend | Short-Term Bond |
| Issuer | Vanguard | Vanguard |
| AUM | 137.72B | 47.88B |
| Avg. Return | 14.25% | 3.12% |
| Div. Yield | 1.14% | 1.89% |
| Expense Ratio | 0.05% | 0.05% |
The Vanguard Small-Cap Index Fund ETF Shares (VB) is a Small Blend fund that is issued by Vanguard. It currently has 137.72B total assets under management and has yielded an average annual return of 14.25% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.05%.
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%.
VB’s dividend yield is 0.75% lower than that of VCSH (1.14% vs. 1.89%). Also, VB yielded on average 11.14% more per year over the past decade (14.25% vs. 3.12%). VB and VCSH have the same expense ratio: 0.05%.
Fund Composition
Holdings
| VB Holdings | Weight |
| Charles River Laboratories International Inc | 0.34% |
| Pool Corp | 0.32% |
| Bio-Techne Corp | 0.32% |
| Avantor Inc | 0.32% |
| PerkinElmer Inc | 0.31% |
| Diamondback Energy Inc | 0.31% |
| VICI Properties Inc Ordinary Shares | 0.3% |
| IDEX Corp | 0.3% |
| Entegris Inc | 0.3% |
| Novavax Inc | 0.29% |
VB’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.34%, 0.32%, 0.32%, 0.32%, and 0.31%.
Diamondback Energy Inc (0.31%), VICI Properties Inc Ordinary Shares (0.3%), and IDEX Corp (0.3%) have a slightly smaller but still significant weight. Entegris Inc and Novavax Inc are also represented in the VB’s holdings at 0.3% and 0.29%.
| 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
| VB | VCSH | |
| Mean Return | 1.15 | 0.24 |
| R-squared | 85.03 | 37.53 |
| Std. Deviation | 17.82 | 2.34 |
| Alpha | -4.02 | 0.93 |
| Beta | 1.21 | 0.48 |
| Sharpe Ratio | 0.74 | 0.97 |
| Treynor Ratio | 10.15 | 4.75 |
The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Beta of 1.21 with a R-squared of 85.03 and a Alpha of -4.02. Its Sharpe Ratio is 0.74 while VB’s Standard Deviation is 17.82. Furthermore, the fund has a Treynor Ratio of 10.15 and a Mean Return of 1.15.
The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) has a Alpha of 0.93 with a Sharpe Ratio of 0.97 and a Treynor Ratio of 4.75. Its Mean Return is 0.24 while VCSH’s Standard Deviation is 2.34. Furthermore, the fund has a R-squared of 37.53 and a Beta of 0.48.
VB’s Mean Return is 0.91 points higher than that of VCSH and its R-squared is 47.50 points higher. With a Standard Deviation of 17.82, VB is slightly more volatile than VCSH. The Alpha and Beta of VB are 4.95 points lower and 0.73 points higher than VCSH’s Alpha and Beta.
Performance
Annual Returns
| Year | VB | VCSH |
| 2020 | 19.08% | 5.08% |
| 2019 | 27.37% | 6.85% |
| 2018 | -9.3% | 0.91% |
| 2017 | 16.24% | 2.45% |
| 2016 | 18.31% | 2.63% |
| 2015 | -3.65% | 1.25% |
| 2014 | 7.51% | 1.96% |
| 2013 | 37.8% | 1.37% |
| 2012 | 18.22% | 5.74% |
| 2011 | -2.68% | 2.94% |
| 2010 | 27.89% | 5.51% |
VB had its best year in 2013 with an annual return of 37.8%. VB’s worst year over the past decade yielded -9.3% and occurred in 2018. In most years the Vanguard Small-Cap Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2016 where annual returns amounted to 16.24%, 18.22%, and 18.31% 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 |
| VB | $10,000 | $31,069 | 14.25% |
| VCSH | $10,000 | $13,569 | 3.12% |
A $10,000 investment in VB would have resulted in a final balance of $31,069. This is a profit of $21,069 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.25%.
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%.
VB’s CAGR is 11.14 percentage points higher than that of VCSH and as a result, would have yielded $17,500 more on a $10,000 investment. Thus, VB outperformed VCSH by 11.14% annually.
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