VCIT vs. VEU: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and VEU is a Vanguard Foreign Large Blend fund. So, what’s the difference between VCIT and VEU? And which fund is better?

The expense ratio of VCIT is 0.03 percentage points lower than VEU’s (0.05% vs. 0.08%). VCIT is mostly comprised of BBB bonds while VEU has a high exposure to the financial services sector. Overall, VCIT has provided lower returns than VEU over the past ten years.

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

Summary

VCIT VEU
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares Vanguard FTSE All-World ex-US Index Fund ETF Shares
Category Corporate Bond Foreign Large Blend
Issuer Vanguard Vanguard
AUM 48.39B 53.64B
Avg. Return 5.84% 6.64%
Div. Yield 2.33% 2.31%
Expense Ratio 0.05% 0.08%

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 Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.

VCIT’s dividend yield is 0.02% higher than that of VEU (2.33% vs. 2.31%). Also, VCIT yielded on average 0.80% less per year over the past decade (5.84% vs. 6.64%). The expense ratio of VCIT is 0.03 percentage points lower than VEU’s (0.05% vs. 0.08%).

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.

VEU - Holdings

VEU Holdings Weight
Tencent Holdings Ltd 1.57%
Alibaba Group Holding Ltd Ordinary Shares 1.4%
Nestle SA 1.22%
Taiwan Semiconductor Manufacturing Co Ltd 0.98%
ASML Holding NV 0.95%
Taiwan Semiconductor Manufacturing Co Ltd ADR 0.91%
Roche Holding AG 0.91%
Toyota Motor Corp 0.75%
LVMH Moet Hennessy Louis Vuitton SE 0.68%
Novartis AG 0.67%

VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.

Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.

Risk Analysis

VCIT VEU
Mean Return 0.44 0.56
R-squared 63.18 98.44
Std. Deviation 5.08 15.08
Alpha 0.89 0.28
Beta 1.35 0.99
Sharpe Ratio 0.91 0.4
Treynor Ratio 3.43 5.12

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

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Beta of 0.99 with a Sharpe Ratio of 0.4 and a Treynor Ratio of 5.12. Its Mean Return is 0.56 while VEU’s Standard Deviation is 15.08. Furthermore, the fund has a R-squared of 98.44 and a Alpha of 0.28.

VCIT’s Mean Return is 0.12 points lower than that of VEU and its R-squared is 35.26 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than VEU. The Alpha and Beta of VCIT are 0.61 points higher and 0.36 points higher than VEU’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. VEU - Annual Returns

Year VCIT VEU
2020 9.55% 11.39%
2019 13.97% 21.63%
2018 -1.75% -13.97%
2017 5.5% 27.27%
2016 5.3% 4.77%
2015 0.88% -4.67%
2014 7.47% -4.05%
2013 -1.8% 14.5%
2012 11.36% 18.55%
2011 7.94% -14.25%
2010 10.65% 11.85%

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 2017 was the strongest year for VEU, returning 27.27% on an annual basis. The poorest year for VEU in the last ten years was 2011, with a yield of -14.25%. Most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares has given investors modest returns, such as in 2016, 2020, and 2010, when gains were 4.77%, 11.39%, and 11.85% respectively.

Portfolio Growth

VCIT vs. VEU - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $17,439 5.84%
VEU $10,000 $16,546 6.64%

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 VEU, the end total would have been $16,546. This equates to a $6,546 profit over 10 years and a compound annual growth rate (CAGR) of 6.64%.

VCIT’s CAGR is 0.80 percentage points lower than that of VEU and as a result, would have yielded $893 more on a $10,000 investment. Thus, VCIT performed worse than VEU by 0.80% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply