VCIT vs. TLT: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and TLT is a iShares Long Government fund. So, what’s the difference between VCIT and TLT? And which fund is better?

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

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

Summary

VCIT TLT
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares iShares 20+ Year Treasury Bond ETF
Category Corporate Bond Long Government
Issuer Vanguard iShares
AUM 48.39B 15.15B
Avg. Return 5.84% 9.00%
Div. Yield 2.33% 1.5%
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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

VCIT’s dividend yield is 0.83% higher than that of TLT (2.33% vs. 1.5%). Also, VCIT yielded on average 3.15% less per year over the past decade (5.84% vs. 9.00%). The expense ratio of VCIT is 0.10 percentage points lower than TLT’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.

TLT - Holdings

TLT Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

TLT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 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.

Risk Analysis

VCIT TLT
Mean Return 0.44 0.63
R-squared 63.18 68.76
Std. Deviation 5.08 12.76
Alpha 0.89 -2.83
Beta 1.35 3.54
Sharpe Ratio 0.91 0.55
Treynor Ratio 3.43 1.82

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

The iShares 20+ Year Treasury Bond ETF (TLT) has a Treynor Ratio of 1.82 with a Alpha of -2.83 and a Sharpe Ratio of 0.55. Its R-squared is 68.76 while TLT’s Mean Return is 0.63. Furthermore, the fund has a Standard Deviation of 12.76 and a Beta of 3.54.

VCIT’s Mean Return is 0.19 points lower than that of TLT and its R-squared is 5.58 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than TLT. The Alpha and Beta of VCIT are 3.72 points higher and 2.19 points lower than TLT’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. TLT - Annual Returns

Year VCIT TLT
2020 9.55% 17.92%
2019 13.97% 14.93%
2018 -1.75% -2.07%
2017 5.5% 8.92%
2016 5.3% 1.36%
2015 0.88% -1.65%
2014 7.47% 27.35%
2013 -1.8% -13.91%
2012 11.36% 3.25%
2011 7.94% 33.6%
2010 10.65% 9.25%

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 2011 was the strongest year for TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.

Portfolio Growth

VCIT vs. TLT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $17,439 5.84%
TLT $10,000 $21,793 9.00%

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 TLT, the end total would have been $21,793. This equates to a $11,793 profit over 10 years and a compound annual growth rate (CAGR) of 9.00%.

VCIT’s CAGR is 3.15 percentage points lower than that of TLT and as a result, would have yielded $4,354 less on a $10,000 investment. Thus, VCIT performed worse than TLT by 3.15% annually.


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