VCIT vs. IWS: What’s The Difference?

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

The expense ratio of VCIT is 0.18 percentage points lower than IWS’s (0.05% vs. 0.23%). VCIT is mostly comprised of BBB bonds while IWS has a high exposure to the financial services sector. Overall, VCIT has provided lower returns than IWS over the past ten years.

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

Summary

VCIT IWS
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares iShares Russell Mid-Cap Value ETF
Category Corporate Bond Mid-Cap Value
Issuer Vanguard iShares
AUM 48.39B 14.24B
Avg. Return 5.84% 12.35%
Div. Yield 2.33% 1.34%
Expense Ratio 0.05% 0.23%

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 Mid-Cap Value ETF (IWS) is a Mid-Cap Value fund that is issued by iShares. It currently has 14.24B total assets under management and has yielded an average annual return of 12.35% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.23%.

VCIT’s dividend yield is 0.99% higher than that of IWS (2.33% vs. 1.34%). Also, VCIT yielded on average 6.51% less per year over the past decade (5.84% vs. 12.35%). The expense ratio of VCIT is 0.18 percentage points lower than IWS’s (0.05% vs. 0.23%).

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.

IWS - Holdings

IWS Holdings Weight
Twitter Inc 0.69%
Marvell Technology Inc 0.69%
IHS Markit Ltd 0.62%
Prudential Financial Inc 0.56%
Otis Worldwide Corp Ordinary Shares 0.54%
International Flavors & Fragrances Inc 0.53%
Xcel Energy Inc 0.52%
Motorola Solutions Inc 0.52%
Aptiv PLC 0.52%
Aflac Inc 0.52%

IWS’s Top Holdings are Twitter Inc, Marvell Technology Inc, IHS Markit Ltd, Prudential Financial Inc, and Otis Worldwide Corp Ordinary Shares at 0.69%, 0.69%, 0.62%, 0.56%, and 0.54%.

International Flavors & Fragrances Inc (0.53%), Xcel Energy Inc (0.52%), and Motorola Solutions Inc (0.52%) have a slightly smaller but still significant weight. Aptiv PLC and Aflac Inc are also represented in the IWS’s holdings at 0.52% and 0.52%.

Risk Analysis

VCIT IWS
Mean Return 0.44 1.06
R-squared 63.18 87.04
Std. Deviation 5.08 16.03
Alpha 0.89 -4.11
Beta 1.35 1.1
Sharpe Ratio 0.91 0.75
Treynor Ratio 3.43 10.3

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

The iShares Russell Mid-Cap Value ETF (IWS) has a Mean Return of 1.06 with a Treynor Ratio of 10.3 and a R-squared of 87.04. Its Beta is 1.1 while IWS’s Alpha is -4.11. Furthermore, the fund has a Standard Deviation of 16.03 and a Sharpe Ratio of 0.75.

VCIT’s Mean Return is 0.62 points lower than that of IWS and its R-squared is 23.86 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than IWS. The Alpha and Beta of VCIT are 5.00 points higher and 0.25 points higher than IWS’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. IWS - Annual Returns

Year VCIT IWS
2020 9.55% 4.76%
2019 13.97% 26.78%
2018 -1.75% -12.36%
2017 5.5% 13.1%
2016 5.3% 19.69%
2015 0.88% -4.93%
2014 7.47% 14.49%
2013 -1.8% 33.11%
2012 11.36% 18.27%
2011 7.94% -1.55%
2010 10.65% 24.46%

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 IWS, returning 33.11% on an annual basis. The poorest year for IWS in the last ten years was 2018, with a yield of -12.36%. Most years the iShares Russell Mid-Cap Value ETF has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 13.1%, 14.49%, and 18.27% respectively.

Portfolio Growth

VCIT vs. IWS - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $17,439 5.84%
IWS $10,000 $26,581 12.35%

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 IWS, the end total would have been $26,581. This equates to a $16,581 profit over 10 years and a compound annual growth rate (CAGR) of 12.35%.

VCIT’s CAGR is 6.51 percentage points lower than that of IWS and as a result, would have yielded $9,142 less on a $10,000 investment. Thus, VCIT performed worse than IWS by 6.51% annually.


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