VCSH vs. GOVT: What’s The Difference?

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. VCSH is a Vanguard Short-Term Bond fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between VCSH and GOVT? And which fund is better?

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

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

Summary

VCSH GOVT
Name Vanguard Short-Term Corporate Bond Index Fund ETF Shares iShares U.S. Treasury Bond ETF
Category Short-Term Bond Intermediate Government
Issuer Vanguard iShares
AUM 47.88B 17.07B
Avg. Return 3.12% 2.67%
Div. Yield 1.89% 1.0%
Expense Ratio 0.05% 0.05%

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 U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.

VCSH’s dividend yield is 0.89% higher than that of GOVT (1.89% vs. 1.0%). Also, VCSH yielded on average 0.44% more per year over the past decade (3.12% vs. 2.67%). VCSH and GOVT have the same expense ratio: 0.05%.

Fund Composition

Holdings

VCSH - Holdings

VCSH Bond Sectors Weight
BBB 47.49%
A 43.06%
AA 8.45%
AAA 0.95%
Below B 0.03%
Others 0.02%
B 0.0%
BB 0.0%
US Government 0.0%

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.

GOVT - Holdings

GOVT Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

GOVT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 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

VCSH GOVT
Mean Return 0.24 0
R-squared 37.53 0
Std. Deviation 2.34 0
Alpha 0.93 0
Beta 0.48 0
Sharpe Ratio 0.97 0
Treynor Ratio 4.75 0

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

The iShares U.S. Treasury Bond ETF (GOVT) has a R-squared of 0 with a Alpha of 0 and a Standard Deviation of 0. Its Treynor Ratio is 0 while GOVT’s Sharpe Ratio is 0. Furthermore, the fund has a Mean Return of 0 and a Beta of 0.

VCSH’s Mean Return is 0.24 points higher than that of GOVT and its R-squared is 37.53 points higher. With a Standard Deviation of 2.34, VCSH is slightly more volatile than GOVT. The Alpha and Beta of VCSH are 0.93 points higher and 0.48 points higher than GOVT’s Alpha and Beta.

Performance

Annual Returns

VCSH vs. GOVT - Annual Returns

Year VCSH GOVT
2020 5.08% 7.92%
2019 6.85% 6.71%
2018 0.91% 0.74%
2017 2.45% 2.19%
2016 2.63% 0.92%
2015 1.25% 0.76%
2014 1.96% 4.99%
2013 1.37% -2.84%
2012 5.74% 0.0%
2011 2.94% 0.0%
2010 5.51% 0.0%

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 2020 was the strongest year for GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.

Portfolio Growth

VCSH vs. GOVT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCSH $10,000 $12,466 3.12%
GOVT $10,000 $12,297 2.67%

A $10,000 investment in VCSH would have resulted in a final balance of $12,466. This is a profit of $2,466 over 8 years and amounts to a compound annual growth rate (CAGR) of 3.12%.

With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.

VCSH’s CAGR is 0.44 percentage points higher than that of GOVT and as a result, would have yielded $169 more on a $10,000 investment. Thus, VCSH outperformed GOVT by 0.44% annually.


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