VCIT vs. TQQQ: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between VCIT and TQQQ? And which fund is better?

The expense ratio of VCIT is 0.90 percentage points lower than TQQQ’s (0.05% vs. 0.95%). VCIT is mostly comprised of BBB bonds while TQQQ has a high exposure to the technology sector. Overall, VCIT has provided lower returns than TQQQ over the past ten years.

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

Summary

VCIT TQQQ
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares ProShares UltraPro QQQ
Category Corporate Bond Trading–Leveraged Equity
Issuer Vanguard ProShares
AUM 48.39B 12.41B
Avg. Return 5.84% 61.22%
Div. Yield 2.33% 0.0%
Expense Ratio 0.05% 0.95%

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 ProShares UltraPro QQQ (TQQQ) is a Trading–Leveraged Equity fund that is issued by ProShares. It currently has 12.41B total assets under management and has yielded an average annual return of 61.22% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.95%.

VCIT’s dividend yield is 2.33% higher than that of TQQQ (2.33% vs. 0.0%). Also, VCIT yielded on average 55.38% less per year over the past decade (5.84% vs. 61.22%). The expense ratio of VCIT is 0.90 percentage points lower than TQQQ’s (0.05% vs. 0.95%).

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.

TQQQ - Holdings

TQQQ Holdings Weight
Nasdaq 100 Index Swap Goldman Sachs International 45.11%
Nasdaq 100 Index Swap Societe Generale 44.73%
Nasdaq 100 Index Swap Bnp Paribas 38.05%
Nasdaq 100 Index Swap Bank Of America Na 31.53%
Nasdaq 100 Index Swap Citibank Na 31.49%
Nasdaq 100 Index Swap Jp Morgan Securities 26.2%
Apple Inc 7.49%
Microsoft Corp 6.69%
Nasdaq 100 Index Swap Credit Suisse International 5.9%
Amazon.com Inc 5.68%

TQQQ’s Top Holdings are Nasdaq 100 Index Swap Goldman Sachs International, Nasdaq 100 Index Swap Societe Generale, Nasdaq 100 Index Swap Bnp Paribas, Nasdaq 100 Index Swap Bank Of America Na, and Nasdaq 100 Index Swap Citibank Na at 45.11%, 44.73%, 38.05%, 31.53%, and 31.49%.

Nasdaq 100 Index Swap Jp Morgan Securities (26.2%), Apple Inc (7.49%), and Microsoft Corp (6.69%) have a slightly smaller but still significant weight. Nasdaq 100 Index Swap Credit Suisse International and Amazon.com Inc are also represented in the TQQQ’s holdings at 5.9% and 5.68%.

Risk Analysis

VCIT TQQQ
Mean Return 0.44 4.65
R-squared 63.18 83.64
Std. Deviation 5.08 50.08
Alpha 0.89 7.29
Beta 1.35 3.37
Sharpe Ratio 0.91 1.1
Treynor Ratio 3.43 15.65

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

The ProShares UltraPro QQQ (TQQQ) has a Mean Return of 4.65 with a Beta of 3.37 and a Sharpe Ratio of 1.1. Its Treynor Ratio is 15.65 while TQQQ’s Standard Deviation is 50.08. Furthermore, the fund has a R-squared of 83.64 and a Alpha of 7.29.

VCIT’s Mean Return is 4.21 points lower than that of TQQQ and its R-squared is 20.46 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than TQQQ. The Alpha and Beta of VCIT are 6.40 points lower and 2.02 points lower than TQQQ’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. TQQQ - Annual Returns

Year VCIT TQQQ
2020 9.55% 109.85%
2019 13.97% 133.93%
2018 -1.75% -19.65%
2017 5.5% 118.65%
2016 5.3% 11.04%
2015 0.88% 17.41%
2014 7.47% 56.82%
2013 -1.8% 139.98%
2012 11.36% 51.95%
2011 7.94% -7.77%
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 TQQQ, returning 139.98% on an annual basis. The poorest year for TQQQ in the last ten years was 2018, with a yield of -19.65%. Most years the ProShares UltraPro QQQ has given investors modest returns, such as in 2015, 2012, and 2014, when gains were 17.41%, 51.95%, and 56.82% respectively.

Portfolio Growth

VCIT vs. TQQQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $17,439 5.84%
TQQQ $10,000 $593,012 61.22%

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 TQQQ, the end total would have been $593,012. This equates to a $583,012 profit over 10 years and a compound annual growth rate (CAGR) of 61.22%.

VCIT’s CAGR is 55.38 percentage points lower than that of TQQQ and as a result, would have yielded $575,573 less on a $10,000 investment. Thus, VCIT performed worse than TQQQ by 55.38% annually.


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