Skip to content

VCSH vs. IGSB: What’s The Difference?

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. VCSH is a Vanguard Short-Term Bond fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between VCSH and IGSB? And which fund is better?

The expense ratio of VCSH is 0.01 percentage points lower than IGSB’s (0.05% vs. 0.06%). VCSH is mostly comprised of BBB bonds and IGSB has a high exposure to BBB bond. Overall, VCSH has provided higher returns than IGSB over the past ten years.

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

TIP: Keep track of all your investments with Personal Capital. I use this amazing tool to aggregate all investments in one place and make sure I'm on track to financial freedom. Oh, and did I mention it's free? Try it out here (link to Personal Capital).

Summary

VCSHIGSB
NameVanguard Short-Term Corporate Bond Index Fund ETF SharesiShares 1-5 Year Investment Grade Corporate Bond ETF
CategoryShort-Term BondShort-Term Bond
IssuerVanguardiShares
AUM47.88B26.63B
Avg. Return3.12%2.51%
Div. Yield1.89%2.02%
Expense Ratio0.05%0.06%

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 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.

VCSH’s dividend yield is 0.13% lower than that of IGSB (1.89% vs. 2.02%). Also, VCSH yielded on average 0.61% more per year over the past decade (3.12% vs. 2.51%). The expense ratio of VCSH is 0.01 percentage points lower than IGSB’s (0.05% vs. 0.06%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

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.

IGSB - Holdings

IGSB Bond SectorsWeight
BBB50.48%
A40.04%
AA7.46%
AAA2.21%
BB0.09%
Below B0.0%
B0.0%
US Government0.0%
Others-0.28%

IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

VCSHIGSB
Mean Return0.240.19
R-squared37.5326.13
Std. Deviation2.342
Alpha0.930.69
Beta0.480.34
Sharpe Ratio0.970.82
Treynor Ratio4.754.82

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

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Treynor Ratio of 4.82 with a Alpha of 0.69 and a Sharpe Ratio of 0.82. Its Beta is 0.34 while IGSB’s Mean Return is 0.19. Furthermore, the fund has a R-squared of 26.13 and a Standard Deviation of 2.

VCSH’s Mean Return is 0.05 points higher than that of IGSB and its R-squared is 11.40 points higher. With a Standard Deviation of 2.34, VCSH is slightly more volatile than IGSB. The Alpha and Beta of VCSH are 0.24 points higher and 0.14 points higher than IGSB’s Alpha and Beta.

FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!

Performance

Annual Returns

VCSH vs. IGSB - Annual Returns

YearVCSHIGSB
20205.08%5.26%
20196.85%7.01%
20180.91%1.34%
20172.45%1.41%
20162.63%1.77%
20151.25%0.7%
20141.96%0.74%
20131.37%1.03%
20125.74%3.28%
20112.94%1.34%
20105.51%3.69%

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 2019 was the strongest year for IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% respectively.

Portfolio Growth

VCSH vs. IGSB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VCSH$10,000$13,5693.12%
IGSB$10,000$12,6372.51%

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 IGSB, the end total would have been $12,637. This equates to a $2,637 profit over 10 years and a compound annual growth rate (CAGR) of 2.51%.

VCSH’s CAGR is 0.61 percentage points higher than that of IGSB and as a result, would have yielded $932 more on a $10,000 investment. Thus, VCSH outperformed IGSB by 0.61% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!

2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.

5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply

Your email address will not be published.