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VCSH vs. EEM: What’s The Difference?

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. VCSH is a Vanguard Short-Term Bond fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between VCSH and EEM? And which fund is better?

The expense ratio of VCSH is 0.63 percentage points lower than EEM’s (0.05% vs. 0.68%). VCSH is mostly comprised of BBB bonds while EEM has a high exposure to the technology sector. Overall, VCSH has provided lower returns than EEM over the past ten years.

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

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Summary

VCSHEEM
NameVanguard Short-Term Corporate Bond Index Fund ETF SharesiShares MSCI Emerging Markets ETF
CategoryShort-Term BondDiversified Emerging Mkts
IssuerVanguardiShares
AUM47.88B30.33B
Avg. Return3.12%5.47%
Div. Yield1.89%1.48%
Expense Ratio0.05%0.68%

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) is a Short-Term Bond fund that is issued by Vanguard. It currently has 47.88B total assets under management and has yielded an average annual return of 3.12% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.05%.

The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.

VCSH’s dividend yield is 0.41% higher than that of EEM (1.89% vs. 1.48%). Also, VCSH yielded on average 2.35% less per year over the past decade (3.12% vs. 5.47%). The expense ratio of VCSH is 0.63 percentage points lower than EEM’s (0.05% vs. 0.68%).

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Fund Composition

Holdings

VCSH - Holdings

VCSH Bond SectorsWeight
BBB47.49%
A43.06%
AA8.45%
AAA0.95%
Below B0.03%
Others0.02%
B0.0%
BB0.0%
US Government0.0%

VCSH’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 47.49%, 43.06%, 8.45%, 0.95%, and 0.03%. The fund is less weighted towards Others (0.02%), B (0.0%), and BB (0.0%) rated bonds.

EEM - Holdings

EEM HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd6.36%
Alibaba Group Holding Ltd Ordinary Shares4.58%
Tencent Holdings Ltd4.41%
Samsung Electronics Co Ltd4.05%
Meituan1.24%
Vale SA1.04%
Naspers Ltd Class N1.04%
Reliance Industries Ltd Shs Dematerialised0.97%
Infosys Ltd0.92%
China Construction Bank Corp Class H0.83%

EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.

Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.

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Risk Analysis

VCSHEEM
Mean Return0.240.38
R-squared37.5383.5
Std. Deviation2.3417.79
Alpha0.93-2.33
Beta0.481.08
Sharpe Ratio0.970.22
Treynor Ratio4.752.22

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) has a Beta of 0.48 with a Sharpe Ratio of 0.97 and a Mean Return of 0.24. Its R-squared is 37.53 while VCSH’s Treynor Ratio is 4.75. Furthermore, the fund has a Standard Deviation of 2.34 and a Alpha of 0.93.

The iShares MSCI Emerging Markets ETF (EEM) has a Treynor Ratio of 2.22 with a Mean Return of 0.38 and a R-squared of 83.5. Its Beta is 1.08 while EEM’s Standard Deviation is 17.79. Furthermore, the fund has a Alpha of -2.33 and a Sharpe Ratio of 0.22.

VCSH’s Mean Return is 0.14 points lower than that of EEM and its R-squared is 45.97 points lower. With a Standard Deviation of 2.34, VCSH is slightly less volatile than EEM. The Alpha and Beta of VCSH are 3.26 points higher and 0.60 points lower than EEM’s Alpha and Beta.

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Performance

Annual Returns

VCSH vs. EEM - Annual Returns

YearVCSHEEM
20205.08%17.56%
20196.85%17.67%
20180.91%-14.98%
20172.45%36.42%
20162.63%10.51%
20151.25%-15.41%
20141.96%-2.82%
20131.37%-3.14%
20125.74%17.32%
20112.94%-18.87%
20105.51%15.93%

VCSH had its best year in 2019 with an annual return of 6.85%. VCSH’s worst year over the past decade yielded 0.91% and occurred in 2018. In most years the Vanguard Short-Term Corporate Bond Index Fund ETF Shares provided moderate returns such as in 2017, 2016, and 2011 where annual returns amounted to 2.45%, 2.63%, and 2.94% respectively.

The year 2017 was the strongest year for EEM, returning 36.42% on an annual basis. The poorest year for EEM in the last ten years was 2011, with a yield of -18.87%. Most years the iShares MSCI Emerging Markets ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were -2.82%, 10.51%, and 15.93% respectively.

Portfolio Growth

VCSH vs. EEM - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VCSH$10,000$13,5693.12%
EEM$10,000$13,4375.47%

A $10,000 investment in VCSH would have resulted in a final balance of $13,569. This is a profit of $3,569 over 10 years and amounts to a compound annual growth rate (CAGR) of 3.12%.

With a $10,000 investment in EEM, the end total would have been $13,437. This equates to a $3,437 profit over 10 years and a compound annual growth rate (CAGR) of 5.47%.

VCSH’s CAGR is 2.35 percentage points lower than that of EEM and as a result, would have yielded $132 more on a $10,000 investment. Thus, VCSH performed worse than EEM by 2.35% annually.


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