The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between VCIT and IGSB? And which fund is better?
The expense ratio of VCIT is 0.01 percentage points lower than IGSB’s (0.05% vs. 0.06%). VCIT is mostly comprised of BBB bonds and IGSB has a high exposure to BBB bond. Overall, VCIT has provided higher returns than IGSB over the past ten years.
In this article, we’ll compare VCIT vs. IGSB. We’ll look at risk metrics and fund composition, as well as at their annual returns and portfolio growth. Moreover, I’ll also discuss VCIT’s and IGSB’s performance, holdings, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares||iShares 1-5 Year Investment Grade Corporate Bond ETF|
|Category||Corporate Bond||Short-Term Bond|
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 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.
VCIT’s dividend yield is 0.31% higher than that of IGSB (2.33% vs. 2.02%). Also, VCIT yielded on average 3.34% more per year over the past decade (5.84% vs. 2.51%). The expense ratio of VCIT is 0.01 percentage points lower than IGSB’s (0.05% vs. 0.06%).
|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.
|IGSB Bond Sectors||Weight|
IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Mean Return of 0.44 with a Sharpe Ratio of 0.91 and a R-squared of 63.18. Its Alpha is 0.89 while VCIT’s Beta is 1.35. Furthermore, the fund has a Standard Deviation of 5.08 and a Treynor Ratio of 3.43.
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Mean Return of 0.19 with a Alpha of 0.69 and a Sharpe Ratio of 0.82. Its Standard Deviation is 2 while IGSB’s Treynor Ratio is 4.82. Furthermore, the fund has a Beta of 0.34 and a R-squared of 26.13.
VCIT’s Mean Return is 0.25 points higher than that of IGSB and its R-squared is 37.05 points higher. With a Standard Deviation of 5.08, VCIT is slightly more volatile than IGSB. The Alpha and Beta of VCIT are 0.20 points higher and 1.01 points higher than IGSB’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 IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% 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 IGSB, the end total would have been $12,637. This equates to a $2,637 profit over 10 years and a compound annual growth rate (CAGR) of 2.51%.
VCIT’s CAGR is 3.34 percentage points higher than that of IGSB and as a result, would have yielded $4,802 more on a $10,000 investment. Thus, VCIT outperformed IGSB by 3.34% annually.
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