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VCSH vs. IWB: What’s The Difference?

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) and the iShares Russell 1000 ETF (IWB) are both among the Top 100 ETFs. VCSH is a Vanguard Short-Term Bond fund and IWB is a iShares Large Blend fund. So, what’s the difference between VCSH and IWB? And which fund is better?

The expense ratio of VCSH is 0.10 percentage points lower than IWB’s (0.05% vs. 0.15%). VCSH is mostly comprised of BBB bonds while IWB has a high exposure to the technology sector. Overall, VCSH has provided lower returns than IWB over the past ten years.

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

VCSHIWB
NameVanguard Short-Term Corporate Bond Index Fund ETF SharesiShares Russell 1000 ETF
CategoryShort-Term BondLarge Blend
IssuerVanguardiShares
AUM47.88B30.54B
Avg. Return3.12%14.64%
Div. Yield1.89%1.14%
Expense Ratio0.05%0.15%

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 Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.

VCSH’s dividend yield is 0.75% higher than that of IWB (1.89% vs. 1.14%). Also, VCSH yielded on average 11.52% less per year over the past decade (3.12% vs. 14.64%). The expense ratio of VCSH is 0.10 percentage points lower than IWB’s (0.05% vs. 0.15%).

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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.

IWB - Holdings

IWB HoldingsWeight
Apple Inc5.45%
Microsoft Corp5.11%
Amazon.com Inc3.43%
Facebook Inc Class A2.03%
Alphabet Inc Class A1.93%
Alphabet Inc Class C1.82%
Tesla Inc1.27%
Berkshire Hathaway Inc Class B1.24%
NVIDIA Corp1.11%
JPMorgan Chase & Co1.09%

IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.

Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.

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Risk Analysis

VCSHIWB
Mean Return0.241.27
R-squared37.5399.73
Std. Deviation2.3413.87
Alpha0.93-0.38
Beta0.481.02
Sharpe Ratio0.971.05
Treynor Ratio4.7514.31

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

The iShares Russell 1000 ETF (IWB) has a Treynor Ratio of 14.31 with a R-squared of 99.73 and a Alpha of -0.38. Its Sharpe Ratio is 1.05 while IWB’s Beta is 1.02. Furthermore, the fund has a Mean Return of 1.27 and a Standard Deviation of 13.87.

VCSH’s Mean Return is 1.03 points lower than that of IWB and its R-squared is 62.20 points lower. With a Standard Deviation of 2.34, VCSH is slightly less volatile than IWB. The Alpha and Beta of VCSH are 1.31 points higher and 0.54 points lower than IWB’s Alpha and Beta.

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Performance

Annual Returns

VCSH vs. IWB - Annual Returns

YearVCSHIWB
20205.08%20.8%
20196.85%31.26%
20180.91%-4.91%
20172.45%21.53%
20162.63%11.91%
20151.25%0.82%
20141.96%13.08%
20131.37%32.93%
20125.74%16.27%
20112.94%1.36%
20105.51%15.94%

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 2013 was the strongest year for IWB, returning 32.93% on an annual basis. The poorest year for IWB in the last ten years was 2018, with a yield of -4.91%. Most years the iShares Russell 1000 ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.08%, 15.94%, and 16.27% respectively.

Portfolio Growth

VCSH vs. IWB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VCSH$10,000$13,5693.12%
IWB$10,000$36,62414.64%

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 IWB, the end total would have been $36,624. This equates to a $26,624 profit over 10 years and a compound annual growth rate (CAGR) of 14.64%.

VCSH’s CAGR is 11.52 percentage points lower than that of IWB and as a result, would have yielded $23,055 less on a $10,000 investment. Thus, VCSH performed worse than IWB by 11.52% annually.


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