VCIT vs. ITOT: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares Core S&P Total U.S. Stock Market ETF (ITOT) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and ITOT is a iShares Large Blend fund. So, what’s the difference between VCIT and ITOT? And which fund is better?

The expense ratio of VCIT is 0.02 percentage points higher than ITOT’s (0.05% vs. 0.03%). VCIT is mostly comprised of BBB bonds while ITOT has a high exposure to the technology sector. Overall, VCIT has provided lower returns than ITOT over the past ten years.

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

Summary

VCIT ITOT
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares iShares Core S&P Total U.S. Stock Market ETF
Category Corporate Bond Large Blend
Issuer Vanguard iShares
AUM 48.39B 41.97B
Avg. Return 5.84% 14.59%
Div. Yield 2.33% 1.2%
Expense Ratio 0.05% 0.03%

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 Core S&P Total U.S. Stock Market ETF (ITOT) is a Large Blend fund that is issued by iShares. It currently has 41.97B total assets under management and has yielded an average annual return of 14.59% over the past 10 years. The fund has a dividend yield of 1.2% with an expense ratio of 0.03%.

VCIT’s dividend yield is 1.13% higher than that of ITOT (2.33% vs. 1.2%). Also, VCIT yielded on average 8.75% less per year over the past decade (5.84% vs. 14.59%). The expense ratio of VCIT is 0.02 percentage points higher than ITOT’s (0.05% vs. 0.03%).

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.

ITOT - Holdings

ITOT Holdings Weight
Apple Inc 5.07%
Microsoft Corp 4.75%
Amazon.com Inc 3.16%
Facebook Inc Class A 1.89%
Alphabet Inc Class A 1.79%
Alphabet Inc Class C 1.71%
Tesla Inc 1.17%
Berkshire Hathaway Inc Class B 1.17%
NVIDIA Corp 1.08%
JPMorgan Chase & Co 1.02%

ITOT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.07%, 4.75%, 3.16%, 1.89%, and 1.79%.

Alphabet Inc Class C (1.71%), Tesla Inc (1.17%), and Berkshire Hathaway Inc Class B (1.17%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ITOT’s holdings at 1.08% and 1.02%.

Risk Analysis

VCIT ITOT
Mean Return 0.44 1.27
R-squared 63.18 99.4
Std. Deviation 5.08 14.02
Alpha 0.89 -0.54
Beta 1.35 1.03
Sharpe Ratio 0.91 1.04
Treynor Ratio 3.43 14.13

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 Beta is 1.35 while VCIT’s Alpha is 0.89. Furthermore, the fund has a Standard Deviation of 5.08 and a Treynor Ratio of 3.43.

The iShares Core S&P Total U.S. Stock Market ETF (ITOT) has a Standard Deviation of 14.02 with a R-squared of 99.4 and a Treynor Ratio of 14.13. Its Beta is 1.03 while ITOT’s Sharpe Ratio is 1.04. Furthermore, the fund has a Alpha of -0.54 and a Mean Return of 1.27.

VCIT’s Mean Return is 0.83 points lower than that of ITOT and its R-squared is 36.22 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than ITOT. The Alpha and Beta of VCIT are 1.43 points higher and 0.32 points higher than ITOT’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. ITOT - Annual Returns

Year VCIT ITOT
2020 9.55% 20.75%
2019 13.97% 30.87%
2018 -1.75% -5.27%
2017 5.5% 21.23%
2016 5.3% 12.59%
2015 0.88% 0.96%
2014 7.47% 13.01%
2013 -1.8% 32.67%
2012 11.36% 15.98%
2011 7.94% 1.55%
2010 10.65% 16.15%

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 2013 was the strongest year for ITOT, returning 32.67% on an annual basis. The poorest year for ITOT in the last ten years was 2018, with a yield of -5.27%. Most years the iShares Core S&P Total U.S. Stock Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 13.01%, 15.98%, and 16.15% respectively.

Portfolio Growth

VCIT vs. ITOT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $17,439 5.84%
ITOT $10,000 $36,427 14.59%

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 ITOT, the end total would have been $36,427. This equates to a $26,427 profit over 10 years and a compound annual growth rate (CAGR) of 14.59%.

VCIT’s CAGR is 8.75 percentage points lower than that of ITOT and as a result, would have yielded $18,988 less on a $10,000 investment. Thus, VCIT performed worse than ITOT by 8.75% annually.


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