The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. VCSH is a Vanguard Short-Term Bond fund and QUAL is a iShares Large Blend fund. So, what’s the difference between VCSH and QUAL? And which fund is better?
The expense ratio of VCSH is 0.10 percentage points lower than QUAL’s (0.05% vs. 0.15%). VCSH is mostly comprised of BBB bonds while QUAL has a high exposure to the technology sector. Overall, VCSH has provided lower returns than QUAL over the past ten years.
In this article, we’ll compare VCSH vs. QUAL. We’ll look at industry exposure and fund composition, as well as at their annual returns and holdings. Moreover, I’ll also discuss VCSH’s and QUAL’s performance, portfolio growth, and risk metrics and examine how these affect their overall returns.
|Name||Vanguard Short-Term Corporate Bond Index Fund ETF Shares||iShares MSCI USA Quality Factor ETF|
|Category||Short-Term Bond||Large Blend|
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 MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.
VCSH’s dividend yield is 0.60% higher than that of QUAL (1.89% vs. 1.29%). Also, VCSH yielded on average 10.30% less per year over the past decade (3.12% vs. 13.42%). The expense ratio of VCSH is 0.10 percentage points lower than QUAL’s (0.05% vs. 0.15%).
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|VCSH Bond Sectors||Weight|
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.
|Facebook Inc Class A||4.77%|
|Nike Inc Class B||4.05%|
|Johnson & Johnson||2.99%|
|Mastercard Inc Class A||2.72%|
|Alphabet Inc Class A||2.49%|
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
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The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) has a R-squared of 37.53 with a Mean Return of 0.24 and a Beta of 0.48. Its Alpha is 0.93 while VCSH’s Treynor Ratio is 4.75. Furthermore, the fund has a Standard Deviation of 2.34 and a Sharpe Ratio of 0.97.
The iShares MSCI USA Quality Factor ETF (QUAL) has a Sharpe Ratio of 0 with a R-squared of 0 and a Mean Return of 0. Its Treynor Ratio is 0 while QUAL’s Standard Deviation is 0. Furthermore, the fund has a Alpha of 0 and a Beta of 0.
VCSH’s Mean Return is 0.24 points higher than that of QUAL and its R-squared is 37.53 points higher. With a Standard Deviation of 2.34, VCSH is slightly more volatile than QUAL. The Alpha and Beta of VCSH are 0.93 points higher and 0.48 points higher than QUAL’s Alpha and Beta.
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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 QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VCSH would have resulted in a final balance of $12,298. This is a profit of $2,298 over 7 years and amounts to a compound annual growth rate (CAGR) of 3.12%.
With a $10,000 investment in QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.
VCSH’s CAGR is 10.30 percentage points lower than that of QUAL and as a result, would have yielded $10,953 less on a $10,000 investment. Thus, VCSH performed worse than QUAL by 10.30% annually.
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