VCIT vs. VGK: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the Vanguard FTSE Europe Index Fund ETF Shares (VGK) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and VGK is a Vanguard Europe Stock fund. So, what’s the difference between VCIT and VGK? And which fund is better?

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

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

Summary

VCIT VGK
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares Vanguard FTSE Europe Index Fund ETF Shares
Category Corporate Bond Europe Stock
Issuer Vanguard Vanguard
AUM 48.39B 25.7B
Avg. Return 5.84% 6.68%
Div. Yield 2.33% 2.52%
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 Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.

VCIT’s dividend yield is 0.19% lower than that of VGK (2.33% vs. 2.52%). Also, VCIT yielded on average 0.84% less per year over the past decade (5.84% vs. 6.68%). The expense ratio of VCIT is 0.03 percentage points lower than VGK’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.

VGK - Holdings

VGK Holdings Weight
Nestle SA 2.82%
ASML Holding NV 2.2%
Roche Holding AG 2.13%
LVMH Moet Hennessy Louis Vuitton SE 1.58%
Novartis AG 1.55%
AstraZeneca PLC 1.27%
SAP SE 1.25%
Unilever PLC 1.23%
Novo Nordisk A/S B 1.09%
Siemens AG 0.96%

VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.

AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.

Risk Analysis

VCIT VGK
Mean Return 0.44 0.61
R-squared 63.18 92.76
Std. Deviation 5.08 16.65
Alpha 0.89 0.45
Beta 1.35 1.06
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 Standard Deviation of 5.08 with a Sharpe Ratio of 0.91 and a R-squared of 63.18. Its Beta is 1.35 while VCIT’s Mean Return is 0.44. Furthermore, the fund has a Treynor Ratio of 3.43 and a Alpha of 0.89.

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Mean Return of 0.61 with a Treynor Ratio of 5.12 and a Alpha of 0.45. Its Sharpe Ratio is 0.4 while VGK’s Standard Deviation is 16.65. Furthermore, the fund has a Beta of 1.06 and a R-squared of 92.76.

VCIT’s Mean Return is 0.17 points lower than that of VGK and its R-squared is 29.58 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than VGK. The Alpha and Beta of VCIT are 0.44 points higher and 0.29 points higher than VGK’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. VGK - Annual Returns

Year VCIT VGK
2020 9.55% 6.5%
2019 13.97% 24.26%
2018 -1.75% -14.79%
2017 5.5% 27.06%
2016 5.3% -0.59%
2015 0.88% -1.87%
2014 7.47% -6.56%
2013 -1.8% 24.93%
2012 11.36% 21.01%
2011 7.94% -11.49%
2010 10.65% 5.01%

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 VGK, returning 27.06% on an annual basis. The poorest year for VGK in the last ten years was 2018, with a yield of -14.79%. Most years the Vanguard FTSE Europe Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were -0.59%, 5.01%, and 6.5% respectively.

Portfolio Growth

VCIT vs. VGK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $17,439 5.84%
VGK $10,000 $17,475 6.68%

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 VGK, the end total would have been $17,475. This equates to a $7,475 profit over 10 years and a compound annual growth rate (CAGR) of 6.68%.

VCIT’s CAGR is 0.84 percentage points lower than that of VGK and as a result, would have yielded $36 less on a $10,000 investment. Thus, VCIT performed worse than VGK by 0.84% annually.


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