VCSH vs. SCHD: What’s The Difference?

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) and the Schwab U.S. Dividend Equity ETF (SCHD) are both among the Top 100 ETFs. VCSH is a Vanguard Short-Term Bond fund and SCHD is a Schwab ETFs Large Value fund. So, what’s the difference between VCSH and SCHD? And which fund is better?

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

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

Summary

VCSH SCHD
Name Vanguard Short-Term Corporate Bond Index Fund ETF Shares Schwab U.S. Dividend Equity ETF
Category Short-Term Bond Large Value
Issuer Vanguard Schwab ETFs
AUM 47.88B 26B
Avg. Return 3.12% 14.80%
Div. Yield 1.89% 2.89%
Expense Ratio 0.05% 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 Schwab U.S. Dividend Equity ETF (SCHD) is a Large Value fund that is issued by Schwab ETFs. It currently has 26B total assets under management and has yielded an average annual return of 14.80% over the past 10 years. The fund has a dividend yield of 2.89% with an expense ratio of 0.06%.

VCSH’s dividend yield is 1.00% lower than that of SCHD (1.89% vs. 2.89%). Also, VCSH yielded on average 11.68% less per year over the past decade (3.12% vs. 14.80%). The expense ratio of VCSH is 0.01 percentage points lower than SCHD’s (0.05% vs. 0.06%).

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.

SCHD - Holdings

SCHD Holdings Weight
Merck & Co Inc 4.24%
The Home Depot Inc 4.19%
Texas Instruments Inc 4.16%
Broadcom Inc 4.15%
Amgen Inc 4.11%
PepsiCo Inc 4.09%
BlackRock Inc 4.05%
Pfizer Inc 3.97%
Verizon Communications Inc 3.96%
Cisco Systems Inc 3.96%

SCHD’s Top Holdings are Merck & Co Inc, The Home Depot Inc, Texas Instruments Inc, Broadcom Inc, and Amgen Inc at 4.24%, 4.19%, 4.16%, 4.15%, and 4.11%.

PepsiCo Inc (4.09%), BlackRock Inc (4.05%), and Pfizer Inc (3.97%) have a slightly smaller but still significant weight. Verizon Communications Inc and Cisco Systems Inc are also represented in the SCHD’s holdings at 3.96% and 3.96%.

Risk Analysis

VCSH SCHD
Mean Return 0.24 0
R-squared 37.53 0
Std. Deviation 2.34 0
Alpha 0.93 0
Beta 0.48 0
Sharpe Ratio 0.97 0
Treynor Ratio 4.75 0

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

The Schwab U.S. Dividend Equity ETF (SCHD) has a Mean Return of 0 with a Standard Deviation of 0 and a Sharpe Ratio of 0. Its Treynor Ratio is 0 while SCHD’s R-squared 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 SCHD and its R-squared is 37.53 points higher. With a Standard Deviation of 2.34, VCSH is slightly more volatile than SCHD. The Alpha and Beta of VCSH are 0.93 points higher and 0.48 points higher than SCHD’s Alpha and Beta.

Performance

Annual Returns

VCSH vs. SCHD - Annual Returns

Year VCSH SCHD
2020 5.08% 15.11%
2019 6.85% 27.28%
2018 0.91% -5.46%
2017 2.45% 20.88%
2016 2.63% 16.25%
2015 1.25% -0.21%
2014 1.96% 11.66%
2013 1.37% 32.9%
2012 5.74% 11.4%
2011 2.94% 0.0%
2010 5.51% 0.0%

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 SCHD, returning 32.9% on an annual basis. The poorest year for SCHD in the last ten years was 2018, with a yield of -5.46%. Most years the Schwab U.S. Dividend Equity ETF has given investors modest returns, such as in 2012, 2014, and 2020, when gains were 11.4%, 11.66%, and 15.11% respectively.

Portfolio Growth

VCSH vs. SCHD - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCSH $10,000 $12,466 3.12%
SCHD $10,000 $28,823 14.80%

A $10,000 investment in VCSH would have resulted in a final balance of $12,466. This is a profit of $2,466 over 8 years and amounts to a compound annual growth rate (CAGR) of 3.12%.

With a $10,000 investment in SCHD, the end total would have been $28,823. This equates to a $18,823 profit over 8 years and a compound annual growth rate (CAGR) of 14.80%.

VCSH’s CAGR is 11.68 percentage points lower than that of SCHD and as a result, would have yielded $16,357 less on a $10,000 investment. Thus, VCSH performed worse than SCHD by 11.68% annually.


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