VCIT vs. IAU: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares Gold Trust (IAU) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and IAU is a iShares N/A fund. So, what’s the difference between VCIT and IAU? And which fund is better?

The expense ratio of VCIT is 0.20 percentage points lower than IAU’s (0.05% vs. 0.25%). VCIT is mostly comprised of BBB bonds while IAU has a high exposure to the technology sector. Overall, VCIT has provided lower returns than IAU over the past ten years.

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

Summary

VCIT IAU
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares iShares Gold Trust
Category Corporate Bond N/A
Issuer Vanguard iShares
AUM 48.39B 28.61B
Avg. Return 5.84% 6.03%
Div. Yield 2.33% 0.0%
Expense Ratio 0.05% 0.25%

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 Gold Trust (IAU) is a N/A fund that is issued by iShares. It currently has 28.61B total assets under management and has yielded an average annual return of 6.03% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.25%.

VCIT’s dividend yield is 2.33% higher than that of IAU (2.33% vs. 0.0%). Also, VCIT yielded on average 0.19% less per year over the past decade (5.84% vs. 6.03%). The expense ratio of VCIT is 0.20 percentage points lower than IAU’s (0.05% vs. 0.25%).

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.

IAU - Holdings

IAU Holdings Weight
Gold 100.0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%

IAU’s Top Holdings are Gold, N/A, N/A, N/A, and N/A at 100.0%, 0%, 0%, 0%, and 0%.

N/A (0%), N/A (0%), and N/A (0%) have a slightly smaller but still significant weight. N/A and N/A are also represented in the IAU’s holdings at 0% and 0%.

Risk Analysis

VCIT IAU
Mean Return 0.44 0.23
R-squared 63.18 16.03
Std. Deviation 5.08 16.97
Alpha 0.89 4.16
Beta 1.35 0.48
Sharpe Ratio 0.91 0.13
Treynor Ratio 3.43 1.5

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Mean Return of 0.44 with a Alpha of 0.89 and a R-squared of 63.18. Its Treynor Ratio is 3.43 while VCIT’s Standard Deviation is 5.08. Furthermore, the fund has a Sharpe Ratio of 0.91 and a Beta of 1.35.

The iShares Gold Trust (IAU) has a Sharpe Ratio of 0.13 with a R-squared of 16.03 and a Treynor Ratio of 1.5. Its Alpha is 4.16 while IAU’s Beta is 0.48. Furthermore, the fund has a Standard Deviation of 16.97 and a Mean Return of 0.23.

VCIT’s Mean Return is 0.21 points higher than that of IAU and its R-squared is 47.15 points higher. With a Standard Deviation of 5.08, VCIT is slightly less volatile than IAU. The Alpha and Beta of VCIT are 3.27 points lower and 0.87 points higher than IAU’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. IAU - Annual Returns

Year VCIT IAU
2020 9.55% 23.86%
2019 13.97% 18.54%
2018 -1.75% -1.39%
2017 5.5% 11.58%
2016 5.3% 8.85%
2015 0.88% -11.65%
2014 7.47% -0.44%
2013 -1.8% -27.96%
2012 11.36% 8.37%
2011 7.94% 8.66%
2010 10.65% 27.93%

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 2010 was the strongest year for IAU, returning 27.93% on an annual basis. The poorest year for IAU in the last ten years was 2013, with a yield of -27.96%. Most years the iShares Gold Trust has given investors modest returns, such as in 2012, 2011, and 2016, when gains were 8.37%, 8.66%, and 8.85% respectively.

Portfolio Growth

VCIT vs. IAU - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $17,439 5.84%
IAU $10,000 $13,121 6.03%

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 IAU, the end total would have been $13,121. This equates to a $3,121 profit over 10 years and a compound annual growth rate (CAGR) of 6.03%.

VCIT’s CAGR is 0.19 percentage points lower than that of IAU and as a result, would have yielded $4,318 more on a $10,000 investment. Thus, VCIT performed worse than IAU by 0.19% annually.


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