VCIT vs. EMB: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between VCIT and EMB? And which fund is better?

The expense ratio of VCIT is 0.34 percentage points lower than EMB’s (0.05% vs. 0.39%). VCIT is mostly comprised of BBB bonds and EMB has a high exposure to BBB bond. Overall, VCIT has provided lower returns than EMB over the past ten years.

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

Summary

VCIT EMB
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares iShares J.P. Morgan USD Emerging Markets Bond ETF
Category Corporate Bond Emerging Markets Bond
Issuer Vanguard iShares
AUM 48.39B 19.76B
Avg. Return 5.84% 6.43%
Div. Yield 2.33% 3.85%
Expense Ratio 0.05% 0.39%

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 J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.

VCIT’s dividend yield is 1.52% lower than that of EMB (2.33% vs. 3.85%). Also, VCIT yielded on average 0.59% less per year over the past decade (5.84% vs. 6.43%). The expense ratio of VCIT is 0.34 percentage points lower than EMB’s (0.05% vs. 0.39%).

Fund Composition

Holdings

VCIT - 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.

EMB - Holdings

EMB Bond Sectors Weight
BBB 33.79%
B 21.97%
BB 16.92%
A 13.67%
AA 7.97%
Below B 4.49%
Others 1.11%
AAA 0.09%
US Government 0.0%

EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.

Risk Analysis

VCIT EMB
Mean Return 0.44 0.44
R-squared 63.18 23.34
Std. Deviation 5.08 8.44
Alpha 0.89 0.89
Beta 1.35 1.36
Sharpe Ratio 0.91 0.55
Treynor Ratio 3.43 3.24

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Standard Deviation of 5.08 with a R-squared of 63.18 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 Mean Return of 0.44.

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Standard Deviation of 8.44 with a Treynor Ratio of 3.24 and a Beta of 1.36. Its Mean Return is 0.44 while EMB’s R-squared is 23.34. Furthermore, the fund has a Alpha of 0.89 and a Sharpe Ratio of 0.55.

VCIT’s Mean Return is 0.00 points lower than that of EMB and its R-squared is 39.84 points higher. With a Standard Deviation of 5.08, VCIT is slightly less volatile than EMB. The Alpha and Beta of VCIT are 0.00 points lower and 0.01 points lower than EMB’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. EMB - Annual Returns

Year VCIT EMB
2020 9.55% 5.48%
2019 13.97% 15.57%
2018 -1.75% -5.67%
2017 5.5% 9.98%
2016 5.3% 9.41%
2015 0.88% 0.43%
2014 7.47% 6.69%
2013 -1.8% -7.42%
2012 11.36% 17.64%
2011 7.94% 7.2%
2010 10.65% 11.47%

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 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.

Portfolio Growth

VCIT vs. EMB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $17,439 5.84%
EMB $10,000 $17,309 6.43%

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 EMB, the end total would have been $17,309. This equates to a $7,309 profit over 10 years and a compound annual growth rate (CAGR) of 6.43%.

VCIT’s CAGR is 0.59 percentage points lower than that of EMB and as a result, would have yielded $130 more on a $10,000 investment. Thus, VCIT performed worse than EMB by 0.59% annually.


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