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VCSH vs. MUB: What’s The Difference?

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

The expense ratio of VCSH is 0.02 percentage points lower than MUB’s (0.05% vs. 0.07%). VCSH is mostly comprised of BBB bonds and MUB has a high exposure to AA bond. Overall, VCSH has provided lower returns than MUB over the past ten years.

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

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Summary

VCSHMUB
NameVanguard Short-Term Corporate Bond Index Fund ETF SharesiShares National Muni Bond ETF
CategoryShort-Term BondMuni National Interm
IssuerVanguardiShares
AUM47.88B22.71B
Avg. Return3.12%4.04%
Div. Yield1.89%1.96%
Expense Ratio0.05%0.07%

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 National Muni Bond ETF (MUB) is a Muni National Interm fund that is issued by iShares. It currently has 22.71B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.96% with an expense ratio of 0.07%.

VCSH’s dividend yield is 0.07% lower than that of MUB (1.89% vs. 1.96%). Also, VCSH yielded on average 0.92% less per year over the past decade (3.12% vs. 4.04%). The expense ratio of VCSH is 0.02 percentage points lower than MUB’s (0.05% vs. 0.07%).

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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.

MUB - Holdings

MUB Bond SectorsWeight
AA60.38%
AAA18.39%
A15.04%
BBB6.0%
Others0.17%
BB0.02%
Below B0.0%
B0.0%
US Government0.0%

MUB’s Top Bond Sectors are ratings of AA, AAA, A, BBB, and Others at 60.38%, 18.39%, 15.04%, 6.0%, and 0.17%. The fund is less weighted towards BB (0.02%), Below B (0.0%), and B (0.0%) rated bonds.

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Risk Analysis

VCSHMUB
Mean Return0.240.32
R-squared37.5399
Std. Deviation2.343.68
Alpha0.93-0.46
Beta0.481.01
Sharpe Ratio0.970.88
Treynor Ratio4.753.2

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

The iShares National Muni Bond ETF (MUB) has a Sharpe Ratio of 0.88 with a Treynor Ratio of 3.2 and a Beta of 1.01. Its R-squared is 99 while MUB’s Alpha is -0.46. Furthermore, the fund has a Standard Deviation of 3.68 and a Mean Return of 0.32.

VCSH’s Mean Return is 0.08 points lower than that of MUB and its R-squared is 61.47 points lower. With a Standard Deviation of 2.34, VCSH is slightly less volatile than MUB. The Alpha and Beta of VCSH are 1.39 points higher and 0.53 points lower than MUB’s Alpha and Beta.

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Performance

Annual Returns

VCSH vs. MUB - Annual Returns

YearVCSHMUB
20205.08%4.87%
20196.85%7.28%
20180.91%0.86%
20172.45%4.61%
20162.63%0.06%
20151.25%2.99%
20141.96%8.61%
20131.37%-3.26%
20125.74%6.14%
20112.94%10.85%
20105.51%1.4%

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 2011 was the strongest year for MUB, returning 10.85% on an annual basis. The poorest year for MUB in the last ten years was 2013, with a yield of -3.26%. Most years the iShares National Muni Bond ETF has given investors modest returns, such as in 2015, 2017, and 2020, when gains were 2.99%, 4.61%, and 4.87% respectively.

Portfolio Growth

VCSH vs. MUB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VCSH$10,000$13,5693.12%
MUB$10,000$15,1214.04%

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 MUB, the end total would have been $15,121. This equates to a $5,121 profit over 10 years and a compound annual growth rate (CAGR) of 4.04%.

VCSH’s CAGR is 0.92 percentage points lower than that of MUB and as a result, would have yielded $1,552 less on a $10,000 investment. Thus, VCSH performed worse than MUB by 0.92% annually.


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