The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares MSCI ACWI ETF (ACWI) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and ACWI is a iShares N/A fund. So, what’s the difference between VCIT and ACWI? And which fund is better?
The expense ratio of VCIT is 0.27 percentage points lower than ACWI’s (0.05% vs. 0.32%). VCIT is mostly comprised of BBB bonds while ACWI has a high exposure to the technology sector. Overall, VCIT has provided lower returns than ACWI over the past ten years.
In this article, we’ll compare VCIT vs. ACWI. We’ll look at portfolio growth and performance, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss VCIT’s and ACWI’s fund composition, holdings, and risk metrics and examine how these affect their overall returns.
Summary
| VCIT | ACWI | |
| Name | Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares | iShares MSCI ACWI ETF |
| Category | Corporate Bond | N/A |
| Issuer | Vanguard | iShares |
| AUM | 48.39B | 16.85B |
| Avg. Return | 5.84% | 10.21% |
| Div. Yield | 2.33% | 1.39% |
| Expense Ratio | 0.05% | 0.32% |
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%.
The iShares MSCI ACWI ETF (ACWI) is a N/A fund that is issued by iShares. It currently has 16.85B total assets under management and has yielded an average annual return of 10.21% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.32%.
VCIT’s dividend yield is 0.94% higher than that of ACWI (2.33% vs. 1.39%). Also, VCIT yielded on average 4.37% less per year over the past decade (5.84% vs. 10.21%). The expense ratio of VCIT is 0.27 percentage points lower than ACWI’s (0.05% vs. 0.32%).
Fund Composition
Holdings
| 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.
| ACWI Holdings | Weight |
| Apple Inc | 3.44% |
| Microsoft Corp | 2.91% |
| Amazon.com Inc | 2.21% |
| Facebook Inc A | 1.25% |
| Alphabet Inc Class C | 1.12% |
| Alphabet Inc A | 1.09% |
| Taiwan Semiconductor Manufacturing Co Ltd | 0.79% |
| Tesla Inc | 0.78% |
| NVIDIA Corp | 0.74% |
| JPMorgan Chase & Co | 0.71% |
ACWI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc Class C at 3.44%, 2.91%, 2.21%, 1.25%, and 1.12%.
Alphabet Inc A (1.09%), Taiwan Semiconductor Manufacturing Co Ltd (0.79%), and Tesla Inc (0.78%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ACWI’s holdings at 0.74% and 0.71%.
Risk Analysis
| VCIT | ACWI | |
| Mean Return | 0.44 | 0.89 |
| R-squared | 63.18 | 99.96 |
| Std. Deviation | 5.08 | 14.05 |
| Alpha | 0.89 | 0.15 |
| Beta | 1.35 | 1 |
| Sharpe Ratio | 0.91 | 0.71 |
| Treynor Ratio | 3.43 | 9.45 |
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Beta of 1.35 with a Alpha of 0.89 and a R-squared of 63.18. Its Standard Deviation is 5.08 while VCIT’s Mean Return is 0.44. Furthermore, the fund has a Treynor Ratio of 3.43 and a Sharpe Ratio of 0.91.
The iShares MSCI ACWI ETF (ACWI) has a Treynor Ratio of 9.45 with a Sharpe Ratio of 0.71 and a Alpha of 0.15. Its Mean Return is 0.89 while ACWI’s Beta is 1. Furthermore, the fund has a R-squared of 99.96 and a Standard Deviation of 14.05.
VCIT’s Mean Return is 0.45 points lower than that of ACWI and its R-squared is 36.78 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than ACWI. The Alpha and Beta of VCIT are 0.74 points higher and 0.35 points higher than ACWI’s Alpha and Beta.
Performance
Annual Returns
| Year | VCIT | ACWI |
| 2020 | 9.55% | 16.38% |
| 2019 | 13.97% | 26.7% |
| 2018 | -1.75% | -9.15% |
| 2017 | 5.5% | 24.35% |
| 2016 | 5.3% | 8.22% |
| 2015 | 0.88% | -2.39% |
| 2014 | 7.47% | 4.64% |
| 2013 | -1.8% | 22.91% |
| 2012 | 11.36% | 15.99% |
| 2011 | 7.94% | -7.6% |
| 2010 | 10.65% | 12.31% |
VCIT had its best year in 2019 with an annual return of 13.97%. VCIT’s worst year over the past decade yielded -1.8% and occurred in 2013. In most years the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares provided moderate returns such as in 2017, 2014, and 2011 where annual returns amounted to 5.5%, 7.47%, and 7.94% respectively.
The year 2019 was the strongest year for ACWI, returning 26.7% on an annual basis. The poorest year for ACWI in the last ten years was 2018, with a yield of -9.15%. Most years the iShares MSCI ACWI ETF has given investors modest returns, such as in 2016, 2010, and 2012, when gains were 8.22%, 12.31%, and 15.99% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VCIT | $10,000 | $17,439 | 5.84% |
| ACWI | $10,000 | $24,255 | 10.21% |
A $10,000 investment in VCIT would have resulted in a final balance of $17,439. This is a profit of $7,439 over 10 years and amounts to a compound annual growth rate (CAGR) of 5.84%.
With a $10,000 investment in ACWI, the end total would have been $24,255. This equates to a $14,255 profit over 10 years and a compound annual growth rate (CAGR) of 10.21%.
VCIT’s CAGR is 4.37 percentage points lower than that of ACWI and as a result, would have yielded $6,816 less on a $10,000 investment. Thus, VCIT performed worse than ACWI by 4.37% 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.
