VCIT vs. MDY: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the SPDR S&P MIDCAP 400 ETF Trust (MDY) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and MDY is a SPDR State Street Global Advisors Mid-Cap Blend fund. So, what’s the difference between VCIT and MDY? And which fund is better?

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

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

Summary

VCIT MDY
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares SPDR S&P MIDCAP 400 ETF Trust
Category Corporate Bond Mid-Cap Blend
Issuer Vanguard SPDR State Street Global Advisors
AUM 48.39B 21.31B
Avg. Return 5.84% 13.29%
Div. Yield 2.33% 0.94%
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 SPDR S&P MIDCAP 400 ETF Trust (MDY) is a Mid-Cap Blend fund that is issued by SPDR State Street Global Advisors. It currently has 21.31B total assets under management and has yielded an average annual return of 13.29% over the past 10 years. The fund has a dividend yield of 0.94% with an expense ratio of 0.23%.

VCIT’s dividend yield is 1.39% higher than that of MDY (2.33% vs. 0.94%). Also, VCIT yielded on average 7.45% less per year over the past decade (5.84% vs. 13.29%). The expense ratio of VCIT is 0.18 percentage points lower than MDY’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.

MDY - Holdings

MDY Holdings Weight
Bio-Techne Corp 0.75%
Molina Healthcare Inc 0.63%
Cognex Corp 0.63%
Fair Isaac Corp 0.62%
XPO Logistics Inc 0.61%
SolarEdge Technologies Inc 0.61%
Signature Bank 0.6%
Graco Inc 0.55%
Camden Property Trust 0.55%
FactSet Research Systems Inc 0.54%

MDY’s Top Holdings are Bio-Techne Corp, Molina Healthcare Inc, Cognex Corp, Fair Isaac Corp, and XPO Logistics Inc at 0.75%, 0.63%, 0.63%, 0.62%, and 0.61%.

SolarEdge Technologies Inc (0.61%), Signature Bank (0.6%), and Graco Inc (0.55%) have a slightly smaller but still significant weight. Camden Property Trust and FactSet Research Systems Inc are also represented in the MDY’s holdings at 0.55% and 0.54%.

Risk Analysis

VCIT MDY
Mean Return 0.44 1.08
R-squared 63.18 86.66
Std. Deviation 5.08 16.83
Alpha 0.89 -4.1
Beta 1.35 1.15
Sharpe Ratio 0.91 0.73
Treynor Ratio 3.43 9.97

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

The SPDR S&P MIDCAP 400 ETF Trust (MDY) has a Alpha of -4.1 with a Beta of 1.15 and a Sharpe Ratio of 0.73. Its R-squared is 86.66 while MDY’s Treynor Ratio is 9.97. Furthermore, the fund has a Standard Deviation of 16.83 and a Mean Return of 1.08.

VCIT’s Mean Return is 0.64 points lower than that of MDY and its R-squared is 23.48 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than MDY. The Alpha and Beta of VCIT are 4.99 points higher and 0.20 points higher than MDY’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. MDY - Annual Returns

Year VCIT MDY
2020 9.55% 13.51%
2019 13.97% 25.86%
2018 -1.75% -11.28%
2017 5.5% 15.89%
2016 5.3% 20.33%
2015 0.88% -2.4%
2014 7.47% 9.42%
2013 -1.8% 33.08%
2012 11.36% 17.58%
2011 7.94% -1.99%
2010 10.65% 26.17%

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 MDY, returning 33.08% on an annual basis. The poorest year for MDY in the last ten years was 2018, with a yield of -11.28%. Most years the SPDR S&P MIDCAP 400 ETF Trust has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 13.51%, 15.89%, and 17.58% respectively.

Portfolio Growth

VCIT vs. MDY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $17,439 5.84%
MDY $10,000 $28,948 13.29%

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 MDY, the end total would have been $28,948. This equates to a $18,948 profit over 10 years and a compound annual growth rate (CAGR) of 13.29%.

VCIT’s CAGR is 7.45 percentage points lower than that of MDY and as a result, would have yielded $11,509 less on a $10,000 investment. Thus, VCIT performed worse than MDY by 7.45% annually.


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