VCIT vs. SCHD: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the Schwab U.S. Dividend Equity ETF (SCHD) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and SCHD is a Schwab ETFs Large Value fund. So, what’s the difference between VCIT and SCHD? And which fund is better?

The expense ratio of VCIT is 0.01 percentage points lower than SCHD’s (0.05% vs. 0.06%). VCIT is mostly comprised of BBB bonds while SCHD has a high exposure to the financial services sector. Overall, VCIT has provided lower returns than SCHD over the past ten years.

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

Summary

VCIT SCHD
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares Schwab U.S. Dividend Equity ETF
Category Corporate Bond Large Value
Issuer Vanguard Schwab ETFs
AUM 48.39B 26B
Avg. Return 5.84% 14.80%
Div. Yield 2.33% 2.89%
Expense Ratio 0.05% 0.06%

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. Dividend Equity ETF (SCHD) is a Large Value fund that is issued by Schwab ETFs. It currently has 26B total assets under management and has yielded an average annual return of 14.80% over the past 10 years. The fund has a dividend yield of 2.89% with an expense ratio of 0.06%.

VCIT’s dividend yield is 0.56% lower than that of SCHD (2.33% vs. 2.89%). Also, VCIT yielded on average 8.96% less per year over the past decade (5.84% vs. 14.80%). The expense ratio of VCIT is 0.01 percentage points lower than SCHD’s (0.05% vs. 0.06%).

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.

SCHD - Holdings

SCHD Holdings Weight
Merck & Co Inc 4.24%
The Home Depot Inc 4.19%
Texas Instruments Inc 4.16%
Broadcom Inc 4.15%
Amgen Inc 4.11%
PepsiCo Inc 4.09%
BlackRock Inc 4.05%
Pfizer Inc 3.97%
Verizon Communications Inc 3.96%
Cisco Systems Inc 3.96%

SCHD’s Top Holdings are Merck & Co Inc, The Home Depot Inc, Texas Instruments Inc, Broadcom Inc, and Amgen Inc at 4.24%, 4.19%, 4.16%, 4.15%, and 4.11%.

PepsiCo Inc (4.09%), BlackRock Inc (4.05%), and Pfizer Inc (3.97%) have a slightly smaller but still significant weight. Verizon Communications Inc and Cisco Systems Inc are also represented in the SCHD’s holdings at 3.96% and 3.96%.

Risk Analysis

VCIT SCHD
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 Standard Deviation of 5.08 with a R-squared of 63.18 and a Beta of 1.35. Its Treynor Ratio is 3.43 while VCIT’s Alpha is 0.89. Furthermore, the fund has a Sharpe Ratio of 0.91 and a Mean Return of 0.44.

The Schwab U.S. Dividend Equity ETF (SCHD) has a Mean Return of 0 with a Beta of 0 and a Standard Deviation of 0. Its Sharpe Ratio is 0 while SCHD’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 SCHD and its R-squared is 63.18 points higher. With a Standard Deviation of 5.08, VCIT is slightly more volatile than SCHD. The Alpha and Beta of VCIT are 0.89 points higher and 1.35 points higher than SCHD’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. SCHD - Annual Returns

Year VCIT SCHD
2020 9.55% 15.11%
2019 13.97% 27.28%
2018 -1.75% -5.46%
2017 5.5% 20.88%
2016 5.3% 16.25%
2015 0.88% -0.21%
2014 7.47% 11.66%
2013 -1.8% 32.9%
2012 11.36% 11.4%
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 2013 was the strongest year for SCHD, returning 32.9% on an annual basis. The poorest year for SCHD in the last ten years was 2018, with a yield of -5.46%. Most years the Schwab U.S. Dividend Equity ETF has given investors modest returns, such as in 2012, 2014, and 2020, when gains were 11.4%, 11.66%, and 15.11% respectively.

Portfolio Growth

VCIT vs. SCHD - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $14,508 5.84%
SCHD $10,000 $28,823 14.80%

A $10,000 investment in VCIT would have resulted in a final balance of $14,508. This is a profit of $4,508 over 8 years and amounts to a compound annual growth rate (CAGR) of 5.84%.

With a $10,000 investment in SCHD, the end total would have been $28,823. This equates to a $18,823 profit over 8 years and a compound annual growth rate (CAGR) of 14.80%.

VCIT’s CAGR is 8.96 percentage points lower than that of SCHD and as a result, would have yielded $14,315 less on a $10,000 investment. Thus, VCIT performed worse than SCHD by 8.96% annually.


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