VCIT vs. IWB: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares Russell 1000 ETF (IWB) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and IWB is a iShares Large Blend fund. So, what’s the difference between VCIT and IWB? And which fund is better?

The expense ratio of VCIT is 0.10 percentage points lower than IWB’s (0.05% vs. 0.15%). VCIT is mostly comprised of BBB bonds while IWB has a high exposure to the technology sector. Overall, VCIT has provided lower returns than IWB over the past ten years.

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

Summary

VCIT IWB
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares iShares Russell 1000 ETF
Category Corporate Bond Large Blend
Issuer Vanguard iShares
AUM 48.39B 30.54B
Avg. Return 5.84% 14.64%
Div. Yield 2.33% 1.14%
Expense Ratio 0.05% 0.15%

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 Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.

VCIT’s dividend yield is 1.19% higher than that of IWB (2.33% vs. 1.14%). Also, VCIT yielded on average 8.79% less per year over the past decade (5.84% vs. 14.64%). The expense ratio of VCIT is 0.10 percentage points lower than IWB’s (0.05% vs. 0.15%).

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.

IWB - Holdings

IWB Holdings Weight
Apple Inc 5.45%
Microsoft Corp 5.11%
Amazon.com Inc 3.43%
Facebook Inc Class A 2.03%
Alphabet Inc Class A 1.93%
Alphabet Inc Class C 1.82%
Tesla Inc 1.27%
Berkshire Hathaway Inc Class B 1.24%
NVIDIA Corp 1.11%
JPMorgan Chase & Co 1.09%

IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.

Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.

Risk Analysis

VCIT IWB
Mean Return 0.44 1.27
R-squared 63.18 99.73
Std. Deviation 5.08 13.87
Alpha 0.89 -0.38
Beta 1.35 1.02
Sharpe Ratio 0.91 1.05
Treynor Ratio 3.43 14.31

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

The iShares Russell 1000 ETF (IWB) has a Standard Deviation of 13.87 with a R-squared of 99.73 and a Treynor Ratio of 14.31. Its Mean Return is 1.27 while IWB’s Beta is 1.02. Furthermore, the fund has a Sharpe Ratio of 1.05 and a Alpha of -0.38.

VCIT’s Mean Return is 0.83 points lower than that of IWB and its R-squared is 36.55 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than IWB. The Alpha and Beta of VCIT are 1.27 points higher and 0.33 points higher than IWB’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. IWB - Annual Returns

Year VCIT IWB
2020 9.55% 20.8%
2019 13.97% 31.26%
2018 -1.75% -4.91%
2017 5.5% 21.53%
2016 5.3% 11.91%
2015 0.88% 0.82%
2014 7.47% 13.08%
2013 -1.8% 32.93%
2012 11.36% 16.27%
2011 7.94% 1.36%
2010 10.65% 15.94%

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 IWB, returning 32.93% on an annual basis. The poorest year for IWB in the last ten years was 2018, with a yield of -4.91%. Most years the iShares Russell 1000 ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.08%, 15.94%, and 16.27% respectively.

Portfolio Growth

VCIT vs. IWB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $17,439 5.84%
IWB $10,000 $36,624 14.64%

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 IWB, the end total would have been $36,624. This equates to a $26,624 profit over 10 years and a compound annual growth rate (CAGR) of 14.64%.

VCIT’s CAGR is 8.79 percentage points lower than that of IWB and as a result, would have yielded $19,185 less on a $10,000 investment. Thus, VCIT performed worse than IWB by 8.79% annually.


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