The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the Vanguard High Dividend Yield Index Fund ETF Shares (VYM) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and VYM is a Vanguard Large Value fund. So, what’s the difference between VCIT and VYM? And which fund is better?
The expense ratio of VCIT is 0.01 percentage points lower than VYM’s (0.05% vs. 0.06%). VCIT is mostly comprised of BBB bonds while VYM has a high exposure to the financial services sector. Overall, VCIT has provided lower returns than VYM over the past ten years.
In this article, we’ll compare VCIT vs. VYM. We’ll look at fund composition and industry exposure, as well as at their risk metrics and annual returns. Moreover, I’ll also discuss VCIT’s and VYM’s portfolio growth, performance, and holdings and examine how these affect their overall returns.
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|Name||Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares||Vanguard High Dividend Yield Index Fund ETF Shares|
|Category||Corporate Bond||Large Value|
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 High Dividend Yield Index Fund ETF Shares (VYM) is a Large Value fund that is issued by Vanguard. It currently has 48.5B total assets under management and has yielded an average annual return of 12.20% over the past 10 years. The fund has a dividend yield of 2.79% with an expense ratio of 0.06%.
VCIT’s dividend yield is 0.46% lower than that of VYM (2.33% vs. 2.79%). Also, VCIT yielded on average 6.36% less per year over the past decade (5.84% vs. 12.20%). The expense ratio of VCIT is 0.01 percentage points lower than VYM’s (0.05% vs. 0.06%).
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|VCIT Bond Sectors||Weight|
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.
|JPMorgan Chase & Co||3.53%|
|Johnson & Johnson||3.28%|
|The Home Depot Inc||2.59%|
|Procter & Gamble Co||2.48%|
|Bank of America Corp||2.35%|
|Exxon Mobil Corp||2.02%|
|Comcast Corp Class A||1.96%|
|Verizon Communications Inc||1.75%|
|Cisco Systems Inc||1.69%|
VYM’s Top Holdings are JPMorgan Chase & Co, Johnson & Johnson, The Home Depot Inc, Procter & Gamble Co, and Bank of America Corp at 3.53%, 3.28%, 2.59%, 2.48%, and 2.35%.
Exxon Mobil Corp (2.02%), Comcast Corp Class A (1.96%), and Verizon Communications Inc (1.75%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the VYM’s holdings at 1.71% and 1.69%.
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Standard Deviation of 5.08 with a Mean Return of 0.44 and a Sharpe Ratio of 0.91. Its Alpha is 0.89 while VCIT’s Beta is 1.35. Furthermore, the fund has a Treynor Ratio of 3.43 and a R-squared of 63.18.
The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a Standard Deviation of 12.69 with a Sharpe Ratio of 0.93 and a R-squared of 88.88. Its Beta is 0.88 while VYM’s Alpha is -0.7. Furthermore, the fund has a Mean Return of 1.04 and a Treynor Ratio of 13.24.
VCIT’s Mean Return is 0.60 points lower than that of VYM and its R-squared is 25.70 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than VYM. The Alpha and Beta of VCIT are 1.59 points higher and 0.47 points higher than VYM’s Alpha and Beta.
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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 VYM, returning 30.26% on an annual basis. The poorest year for VYM in the last ten years was 2018, with a yield of -5.87%. Most years the Vanguard High Dividend Yield Index Fund ETF Shares has given investors modest returns, such as in 2012, 2014, and 2010, when gains were 12.68%, 13.47%, and 14.17% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 VYM, the end total would have been $29,705. This equates to a $19,705 profit over 10 years and a compound annual growth rate (CAGR) of 12.20%.
VCIT’s CAGR is 6.36 percentage points lower than that of VYM and as a result, would have yielded $12,266 less on a $10,000 investment. Thus, VCIT performed worse than VYM by 6.36% annually.
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