The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and LQD is a iShares Corporate Bond fund. So, what’s the difference between VCIT and LQD? And which fund is better?
The expense ratio of VCIT is 0.09 percentage points lower than LQD’s (0.05% vs. 0.14%). VCIT is mostly comprised of BBB bonds and LQD has a high exposure to BBB bond. Overall, VCIT has provided lower returns than LQD over the past ten years.
In this article, we’ll compare VCIT vs. LQD. We’ll look at performance and annual returns, as well as at their portfolio growth and risk metrics. Moreover, I’ll also discuss VCIT’s and LQD’s industry exposure, fund composition, and holdings and examine how these affect their overall returns.
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|Name||Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares||iShares iBoxx $ Investment Grade Corporate Bond ETF|
|Category||Corporate Bond||Corporate 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 iBoxx $ Investment Grade Corporate Bond ETF (LQD) is a Corporate Bond fund that is issued by iShares. It currently has 40.23B total assets under management and has yielded an average annual return of 6.58% over the past 10 years. The fund has a dividend yield of 2.48% with an expense ratio of 0.14%.
VCIT’s dividend yield is 0.15% lower than that of LQD (2.33% vs. 2.48%). Also, VCIT yielded on average 0.74% less per year over the past decade (5.84% vs. 6.58%). The expense ratio of VCIT is 0.09 percentage points lower than LQD’s (0.05% vs. 0.14%).
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|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.
|LQD Bond Sectors||Weight|
LQD’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.92%, 37.97%, 8.49%, 2.7%, and 0.05%. 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 Beta of 1.35 and a R-squared of 63.18. Its Sharpe Ratio is 0.91 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 iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Beta of 1.62 with a Treynor Ratio of 3.08 and a Mean Return of 0.47. Its R-squared is 66.93 while LQD’s Standard Deviation is 5.94. Furthermore, the fund has a Sharpe Ratio of 0.85 and a Alpha of 0.52.
VCIT’s Mean Return is 0.03 points lower than that of LQD and its R-squared is 3.75 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than LQD. The Alpha and Beta of VCIT are 0.37 points higher and 0.27 points lower than LQD’s Alpha and Beta.
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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 LQD, returning 17.13% on an annual basis. The poorest year for LQD in the last ten years was 2018, with a yield of -3.76%. Most years the iShares iBoxx $ Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2017, 2014, and 2011, when gains were 7.16%, 8.57%, and 8.89% 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 LQD, the end total would have been $18,118. This equates to a $8,118 profit over 10 years and a compound annual growth rate (CAGR) of 6.58%.
VCIT’s CAGR is 0.74 percentage points lower than that of LQD and as a result, would have yielded $679 less on a $10,000 investment. Thus, VCIT performed worse than LQD by 0.74% annually.
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