VCIT vs. VTIP: What’s The Difference?

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

VCIT and VTIP have the same expense ratio: 0.05%. VCIT is mostly comprised of BBB bonds and VTIP has a high exposure to AAA bond. Overall, VCIT has provided higher returns than VTIP over the past ten years.

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

Summary

VCIT VTIP
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares
Category Corporate Bond Inflation-Protected Bond
Issuer Vanguard Vanguard
AUM 48.39B 50.67B
Avg. Return 5.84% 1.79%
Div. Yield 2.33% 1.35%
Expense Ratio 0.05% 0.05%

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 Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.

VCIT’s dividend yield is 0.98% higher than that of VTIP (2.33% vs. 1.35%). Also, VCIT yielded on average 4.05% more per year over the past decade (5.84% vs. 1.79%). VCIT and VTIP have the same expense ratio: 0.05%.

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.

VTIP - Holdings

VTIP Bond Sectors Weight
AAA 99.87%
Others 0.13%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 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 VTIP
Mean Return 0.44 0
R-squared 63.18 0
Std. Deviation 5.08 0
Alpha 0.89 0
Beta 1.35 0
Sharpe Ratio 0.91 0
Treynor Ratio 3.43 0

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

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a Treynor Ratio of 0 with a Beta of 0 and a Sharpe Ratio of 0. Its Standard Deviation is 0 while VTIP’s Alpha is 0. Furthermore, the fund has a Mean Return of 0 and a R-squared of 0.

VCIT’s Mean Return is 0.44 points higher than that of VTIP and its R-squared is 63.18 points higher. With a Standard Deviation of 5.08, VCIT is slightly more volatile than VTIP. The Alpha and Beta of VCIT are 0.89 points higher and 1.35 points higher than VTIP’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. VTIP - Annual Returns

Year VCIT VTIP
2020 9.55% 4.97%
2019 13.97% 4.83%
2018 -1.75% 0.54%
2017 5.5% 0.82%
2016 5.3% 2.71%
2015 0.88% -0.15%
2014 7.47% -1.17%
2013 -1.8% -1.55%
2012 11.36% 0.0%
2011 7.94% 0.0%
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 2020 was the strongest year for VTIP, returning 4.97% on an annual basis. The poorest year for VTIP in the last ten years was 2013, with a yield of -1.55%. Most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 0.54% respectively.

Portfolio Growth

VCIT vs. VTIP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $14,774 5.84%
VTIP $10,000 $11,305 1.79%

A $10,000 investment in VCIT would have resulted in a final balance of $14,774. This is a profit of $4,774 over 7 years and amounts to a compound annual growth rate (CAGR) of 5.84%.

With a $10,000 investment in VTIP, the end total would have been $11,305. This equates to a $1,305 profit over 7 years and a compound annual growth rate (CAGR) of 1.79%.

VCIT’s CAGR is 4.05 percentage points higher than that of VTIP and as a result, would have yielded $3,469 more on a $10,000 investment. Thus, VCIT outperformed VTIP by 4.05% annually.


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