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.

Summary

VCSH IWB
Name Vanguard Short-Term Corporate Bond Index Fund ETF Shares iShares Russell 1000 ETF
Category Short-Term Bond Large Blend
Issuer Vanguard iShares
AUM 47.88B 30.54B
Avg. Return 3.12% 14.64%
Div. Yield 1.89% 1.14%
Expense Ratio 0.05% 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%).

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.

IWB - Holdings

IWB Holdings Weight
Apple Inc 5.45%
Microsoft Corp 5.11%
Amazon.com Inc 3.43%
Facebook Inc Class A 2.03%
Alphabet Inc Class A 1.93%
Alphabet Inc Class C 1.82%
Tesla Inc 1.27%
Berkshire Hathaway Inc Class B 1.24%
NVIDIA Corp 1.11%
JPMorgan Chase & Co 1.09%

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%.

Risk Analysis

VCSH IWB
Mean Return 0.24 1.27
R-squared 37.53 99.73
Std. Deviation 2.34 13.87
Alpha 0.93 -0.38
Beta 0.48 1.02
Sharpe Ratio 0.97 1.05
Treynor Ratio 4.75 14.31

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.

Performance

Annual Returns

VCSH vs. IWB - Annual Returns

Year VCSH IWB
2020 5.08% 20.8%
2019 6.85% 31.26%
2018 0.91% -4.91%
2017 2.45% 21.53%
2016 2.63% 11.91%
2015 1.25% 0.82%
2014 1.96% 13.08%
2013 1.37% 32.93%
2012 5.74% 16.27%
2011 2.94% 1.36%
2010 5.51% 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

Fund Initial Balance Final Balance CAGR
VCSH $10,000 $13,569 3.12%
IWB $10,000 $36,624 14.64%

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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