VCIT vs. MTUM: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares MSCI USA Momentum Factor ETF (MTUM) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and MTUM is a iShares Large Growth fund. So, what’s the difference between VCIT and MTUM? And which fund is better?

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

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

Summary

VCIT MTUM
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares iShares MSCI USA Momentum Factor ETF
Category Corporate Bond Large Growth
Issuer Vanguard iShares
AUM 48.39B 14.53B
Avg. Return 5.84% 17.37%
Div. Yield 2.33% 0.44%
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 MSCI USA Momentum Factor ETF (MTUM) is a Large Growth fund that is issued by iShares. It currently has 14.53B total assets under management and has yielded an average annual return of 17.37% over the past 10 years. The fund has a dividend yield of 0.44% with an expense ratio of 0.15%.

VCIT’s dividend yield is 1.89% higher than that of MTUM (2.33% vs. 0.44%). Also, VCIT yielded on average 11.53% less per year over the past decade (5.84% vs. 17.37%). The expense ratio of VCIT is 0.10 percentage points lower than MTUM’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.

MTUM - Holdings

MTUM Holdings Weight
Tesla Inc 5.63%
The Walt Disney Co 4.39%
JPMorgan Chase & Co 4.35%
Berkshire Hathaway Inc Class B 4.34%
Bank of America Corp 3.81%
PayPal Holdings Inc 3.76%
Wells Fargo & Co 3.05%
Applied Materials Inc 3.05%
Moderna Inc 2.89%
Alphabet Inc Class C 2.84%

MTUM’s Top Holdings are Tesla Inc, The Walt Disney Co, JPMorgan Chase & Co, Berkshire Hathaway Inc Class B, and Bank of America Corp at 5.63%, 4.39%, 4.35%, 4.34%, and 3.81%.

PayPal Holdings Inc (3.76%), Wells Fargo & Co (3.05%), and Applied Materials Inc (3.05%) have a slightly smaller but still significant weight. Moderna Inc and Alphabet Inc Class C are also represented in the MTUM’s holdings at 2.89% and 2.84%.

Risk Analysis

VCIT MTUM
Mean Return 0.44 0
R-squared 63.18 0
Std. Deviation 5.08 0
Alpha 0.89 0
Beta 1.35 0
Sharpe Ratio 0.91 0
Treynor Ratio 3.43 0

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

The iShares MSCI USA Momentum Factor ETF (MTUM) has a Beta of 0 with a Sharpe Ratio of 0 and a Mean Return of 0. Its Standard Deviation is 0 while MTUM’s Treynor Ratio is 0. Furthermore, the fund has a Alpha of 0 and a R-squared of 0.

VCIT’s Mean Return is 0.44 points higher than that of MTUM and its R-squared is 63.18 points higher. With a Standard Deviation of 5.08, VCIT is slightly more volatile than MTUM. The Alpha and Beta of VCIT are 0.89 points higher and 1.35 points higher than MTUM’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. MTUM - Annual Returns

Year VCIT MTUM
2020 9.55% 29.69%
2019 13.97% 27.57%
2018 -1.75% -1.77%
2017 5.5% 37.6%
2016 5.3% 4.89%
2015 0.88% 9.12%
2014 7.47% 14.48%
2013 -1.8% 0.0%
2012 11.36% 0.0%
2011 7.94% 0.0%
2010 10.65% 0.0%

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 2017 was the strongest year for MTUM, returning 37.6% on an annual basis. The poorest year for MTUM in the last ten years was 2018, with a yield of -1.77%. Most years the iShares MSCI USA Momentum Factor ETF has given investors modest returns, such as in 2010, 2016, and 2015, when gains were 0.0%, 4.89%, and 9.12% respectively.

Portfolio Growth

VCIT vs. MTUM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $14,774 5.84%
MTUM $10,000 $29,301 17.37%

A $10,000 investment in VCIT would have resulted in a final balance of $14,774. This is a profit of $4,774 over 7 years and amounts to a compound annual growth rate (CAGR) of 5.84%.

With a $10,000 investment in MTUM, the end total would have been $29,301. This equates to a $19,301 profit over 7 years and a compound annual growth rate (CAGR) of 17.37%.

VCIT’s CAGR is 11.53 percentage points lower than that of MTUM and as a result, would have yielded $14,527 less on a $10,000 investment. Thus, VCIT performed worse than MTUM by 11.53% annually.


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