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.
|Name||Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares||iShares MSCI ACWI ETF|
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%).
|VCIT Bond Sectors||Weight|
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.
|Facebook Inc A||1.25%|
|Alphabet Inc Class C||1.12%|
|Alphabet Inc A||1.09%|
|Taiwan Semiconductor Manufacturing Co Ltd||0.79%|
|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%.
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.
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.
|Fund||Initial Balance||Final Balance||CAGR|
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.
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