The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and SHY is a iShares Short Government fund. So, what’s the difference between VCIT and SHY? And which fund is better?
The expense ratio of VCIT is 0.10 percentage points lower than SHY’s (0.05% vs. 0.15%). VCIT is mostly comprised of BBB bonds and SHY has a high exposure to AAA bond. Overall, VCIT has provided higher returns than SHY over the past ten years.
In this article, we’ll compare VCIT vs. SHY. We’ll look at annual returns and industry exposure, as well as at their performance and holdings. Moreover, I’ll also discuss VCIT’s and SHY’s fund composition, risk metrics, and portfolio growth and examine how these affect their overall returns.
|Name||Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares||iShares 1-3 Year Treasury Bond ETF|
|Category||Corporate Bond||Short Government|
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 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.
VCIT’s dividend yield is 1.87% higher than that of SHY (2.33% vs. 0.46%). Also, VCIT yielded on average 4.57% more per year over the past decade (5.84% vs. 1.27%). The expense ratio of VCIT is 0.10 percentage points lower than SHY’s (0.05% vs. 0.15%).
|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.
|SHY Bond Sectors||Weight|
SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Treynor Ratio of 3.43 with a Beta of 1.35 and a Mean Return of 0.44. Its Standard Deviation is 5.08 while VCIT’s R-squared is 63.18. Furthermore, the fund has a Alpha of 0.89 and a Sharpe Ratio of 0.91.
The iShares 1-3 Year Treasury Bond ETF (SHY) has a Beta of 0.18 with a R-squared of 39.11 and a Sharpe Ratio of 0.54. Its Alpha is -0.03 while SHY’s Mean Return is 0.09. Furthermore, the fund has a Treynor Ratio of 2.6 and a Standard Deviation of 0.89.
VCIT’s Mean Return is 0.35 points higher than that of SHY and its R-squared is 24.07 points higher. With a Standard Deviation of 5.08, VCIT is slightly more volatile than SHY. The Alpha and Beta of VCIT are 0.92 points higher and 1.17 points higher than SHY’s Alpha and Beta.
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 SHY, returning 3.42% on an annual basis. The poorest year for SHY in the last ten years was 2013, with a yield of 0.23%. Most years the iShares 1-3 Year Treasury Bond ETF has given investors modest returns, such as in 2014, 2016, and 2011, when gains were 0.48%, 0.75%, and 1.43% 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 SHY, the end total would have been $11,235. This equates to a $1,235 profit over 10 years and a compound annual growth rate (CAGR) of 1.27%.
VCIT’s CAGR is 4.57 percentage points higher than that of SHY and as a result, would have yielded $6,204 more on a $10,000 investment. Thus, VCIT outperformed SHY by 4.57% annually.
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