The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between VCIT and SCHA? And which fund is better?
The expense ratio of VCIT is 0.01 percentage points higher than SCHA’s (0.05% vs. 0.04%). VCIT is mostly comprised of BBB bonds while SCHA has a high exposure to the healthcare sector. Overall, VCIT has provided lower returns than SCHA over the past ten years.
In this article, we’ll compare VCIT vs. SCHA. We’ll look at industry exposure and portfolio growth, as well as at their annual returns and fund composition. Moreover, I’ll also discuss VCIT’s and SCHA’s holdings, risk metrics, and performance and examine how these affect their overall returns.
Summary
| VCIT | SCHA | |
| Name | Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares | Schwab U.S. Small-Cap ETF |
| Category | Corporate Bond | Small Blend |
| Issuer | Vanguard | Schwab ETFs |
| AUM | 48.39B | 16.51B |
| Avg. Return | 5.84% | 12.62% |
| Div. Yield | 2.33% | 0.98% |
| Expense Ratio | 0.05% | 0.04% |
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 Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.
VCIT’s dividend yield is 1.35% higher than that of SCHA (2.33% vs. 0.98%). Also, VCIT yielded on average 6.78% less per year over the past decade (5.84% vs. 12.62%). The expense ratio of VCIT is 0.01 percentage points higher than SCHA’s (0.05% vs. 0.04%).
Fund Composition
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.
| SCHA Holdings | Weight |
| AMC Entertainment Holdings Inc Class A | 0.67% |
| Caesars Entertainment Inc | 0.51% |
| Cloudflare Inc | 0.48% |
| NovoCure Ltd | 0.45% |
| Plug Power Inc | 0.41% |
| 10x Genomics Inc Ordinary Shares – Class A | 0.34% |
| GameStop Corp Class A | 0.28% |
| RH | 0.27% |
| Penn National Gaming Inc | 0.27% |
| Axon Enterprise Inc | 0.27% |
SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.
10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.
Risk Analysis
| VCIT | SCHA | |
| Mean Return | 0.44 | 1.14 |
| R-squared | 63.18 | 82.26 |
| Std. Deviation | 5.08 | 18.68 |
| Alpha | 0.89 | -4.65 |
| Beta | 1.35 | 1.25 |
| Sharpe Ratio | 0.91 | 0.7 |
| Treynor Ratio | 3.43 | 9.62 |
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Standard Deviation of 5.08 with a Sharpe Ratio of 0.91 and a Alpha of 0.89. Its Beta is 1.35 while VCIT’s R-squared is 63.18. Furthermore, the fund has a Mean Return of 0.44 and a Treynor Ratio of 3.43.
The Schwab U.S. Small-Cap ETF (SCHA) has a Beta of 1.25 with a Treynor Ratio of 9.62 and a Sharpe Ratio of 0.7. Its Mean Return is 1.14 while SCHA’s Standard Deviation is 18.68. Furthermore, the fund has a Alpha of -4.65 and a R-squared of 82.26.
VCIT’s Mean Return is 0.70 points lower than that of SCHA and its R-squared is 19.08 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than SCHA. The Alpha and Beta of VCIT are 5.54 points higher and 0.10 points higher than SCHA’s Alpha and Beta.
Performance
Annual Returns
| Year | VCIT | SCHA |
| 2020 | 9.55% | 19.35% |
| 2019 | 13.97% | 26.54% |
| 2018 | -1.75% | -11.75% |
| 2017 | 5.5% | 15.04% |
| 2016 | 5.3% | 19.88% |
| 2015 | 0.88% | -4.24% |
| 2014 | 7.47% | 6.53% |
| 2013 | -1.8% | 39.59% |
| 2012 | 11.36% | 18.24% |
| 2011 | 7.94% | -2.95% |
| 2010 | 10.65% | 28.31% |
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 SCHA, returning 39.59% on an annual basis. The poorest year for SCHA in the last ten years was 2018, with a yield of -11.75%. Most years the Schwab U.S. Small-Cap ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 15.04%, 18.24%, and 19.35% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VCIT | $10,000 | $17,439 | 5.84% |
| SCHA | $10,000 | $30,035 | 12.62% |
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 SCHA, the end total would have been $30,035. This equates to a $20,035 profit over 10 years and a compound annual growth rate (CAGR) of 12.62%.
VCIT’s CAGR is 6.78 percentage points lower than that of SCHA and as a result, would have yielded $12,596 less on a $10,000 investment. Thus, VCIT performed worse than SCHA by 6.78% annually.
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