VCSH vs. SDY: What’s The Difference?

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) and the SPDR S&P Dividend ETF (SDY) are both among the Top 100 ETFs. VCSH is a Vanguard Short-Term Bond fund and SDY is a SPDR State Street Global Advisors Large Value fund. So, what’s the difference between VCSH and SDY? And which fund is better?

The expense ratio of VCSH is 0.30 percentage points lower than SDY’s (0.05% vs. 0.35%). VCSH is mostly comprised of BBB bonds while SDY has a high exposure to the financial services sector. Overall, VCSH has provided lower returns than SDY over the past ten years.

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

Summary

VCSH SDY
Name Vanguard Short-Term Corporate Bond Index Fund ETF Shares SPDR S&P Dividend ETF
Category Short-Term Bond Large Value
Issuer Vanguard SPDR State Street Global Advisors
AUM 47.88B 19.67B
Avg. Return 3.12% 12.44%
Div. Yield 1.89% 2.65%
Expense Ratio 0.05% 0.35%

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 SPDR S&P Dividend ETF (SDY) is a Large Value fund that is issued by SPDR State Street Global Advisors. It currently has 19.67B total assets under management and has yielded an average annual return of 12.44% over the past 10 years. The fund has a dividend yield of 2.65% with an expense ratio of 0.35%.

VCSH’s dividend yield is 0.76% lower than that of SDY (1.89% vs. 2.65%). Also, VCSH yielded on average 9.32% less per year over the past decade (3.12% vs. 12.44%). The expense ratio of VCSH is 0.30 percentage points lower than SDY’s (0.05% vs. 0.35%).

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.

SDY - Holdings

SDY Holdings Weight
Exxon Mobil Corp 2.81%
AT&T Inc 2.5%
South Jersey Industries Inc 2.22%
Chevron Corp 2.02%
International Business Machines Corp 2.0%
AbbVie Inc 1.93%
National Retail Properties Inc 1.86%
Federal Realty Investment Trust 1.77%
Realty Income Corp 1.7%
Old Republic International Corp 1.65%

SDY’s Top Holdings are Exxon Mobil Corp, AT&T Inc, South Jersey Industries Inc, Chevron Corp, and International Business Machines Corp at 2.81%, 2.5%, 2.22%, 2.02%, and 2.0%.

AbbVie Inc (1.93%), National Retail Properties Inc (1.86%), and Federal Realty Investment Trust (1.77%) have a slightly smaller but still significant weight. Realty Income Corp and Old Republic International Corp are also represented in the SDY’s holdings at 1.7% and 1.65%.

Risk Analysis

VCSH SDY
Mean Return 0.24 1.07
R-squared 37.53 83.62
Std. Deviation 2.34 12.9
Alpha 0.93 -0.1
Beta 0.48 0.87
Sharpe Ratio 0.97 0.95
Treynor Ratio 4.75 13.94

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

The SPDR S&P Dividend ETF (SDY) has a R-squared of 83.62 with a Mean Return of 1.07 and a Treynor Ratio of 13.94. Its Beta is 0.87 while SDY’s Alpha is -0.1. Furthermore, the fund has a Sharpe Ratio of 0.95 and a Standard Deviation of 12.9.

VCSH’s Mean Return is 0.83 points lower than that of SDY and its R-squared is 46.09 points lower. With a Standard Deviation of 2.34, VCSH is slightly less volatile than SDY. The Alpha and Beta of VCSH are 1.03 points higher and 0.39 points lower than SDY’s Alpha and Beta.

Performance

Annual Returns

VCSH vs. SDY - Annual Returns

Year VCSH SDY
2020 5.08% 1.78%
2019 6.85% 23.37%
2018 0.91% -2.73%
2017 2.45% 15.84%
2016 2.63% 20.17%
2015 1.25% -0.7%
2014 1.96% 13.8%
2013 1.37% 30.09%
2012 5.74% 11.51%
2011 2.94% 7.28%
2010 5.51% 16.41%

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 SDY, returning 30.09% on an annual basis. The poorest year for SDY in the last ten years was 2018, with a yield of -2.73%. Most years the SPDR S&P Dividend ETF has given investors modest returns, such as in 2012, 2014, and 2017, when gains were 11.51%, 13.8%, and 15.84% respectively.

Portfolio Growth

VCSH vs. SDY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCSH $10,000 $13,569 3.12%
SDY $10,000 $29,900 12.44%

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 SDY, the end total would have been $29,900. This equates to a $19,900 profit over 10 years and a compound annual growth rate (CAGR) of 12.44%.

VCSH’s CAGR is 9.32 percentage points lower than that of SDY and as a result, would have yielded $16,331 less on a $10,000 investment. Thus, VCSH performed worse than SDY by 9.32% annually.


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