The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and IEF is a iShares Long Government fund. So, what’s the difference between VCIT and IEF? And which fund is better?
The expense ratio of VCIT is 0.10 percentage points lower than IEF’s (0.05% vs. 0.15%). VCIT is mostly comprised of BBB bonds and IEF has a high exposure to AAA bond. Overall, VCIT has provided higher returns than IEF over the past ten years.
In this article, we’ll compare VCIT vs. IEF. We’ll look at portfolio growth and annual returns, as well as at their performance and industry exposure. Moreover, I’ll also discuss VCIT’s and IEF’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 7-10 Year Treasury Bond ETF|
|Category||Corporate Bond||Long Government|
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 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
VCIT’s dividend yield is 1.49% higher than that of IEF (2.33% vs. 0.84%). Also, VCIT yielded on average 0.78% more per year over the past decade (5.84% vs. 5.06%). The expense ratio of VCIT is 0.10 percentage points lower than IEF’s (0.05% vs. 0.15%).
|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.
|IEF Bond Sectors||Weight|
IEF’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
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 Sharpe Ratio of 0.91. Its R-squared is 63.18 while VCIT’s Standard Deviation is 5.08. Furthermore, the fund has a Treynor Ratio of 3.43 and a Beta of 1.35.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Sharpe Ratio of 0.6 with a Mean Return of 0.32 and a Alpha of -1.2. Its R-squared is 77.56 while IEF’s Standard Deviation is 5.42. Furthermore, the fund has a Beta of 1.59 and a Treynor Ratio of 1.97.
VCIT’s Mean Return is 0.12 points higher than that of IEF and its R-squared is 14.38 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than IEF. The Alpha and Beta of VCIT are 2.09 points higher and 0.24 points lower than IEF’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 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% 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 IEF, the end total would have been $15,497. This equates to a $5,497 profit over 10 years and a compound annual growth rate (CAGR) of 5.06%.
VCIT’s CAGR is 0.78 percentage points higher than that of IEF and as a result, would have yielded $1,942 more on a $10,000 investment. Thus, VCIT outperformed IEF by 0.78% annually.
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