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VCSH vs. TLT: What’s The Difference?

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. VCSH is a Vanguard Short-Term Bond fund and TLT is a iShares Long Government fund. So, what’s the difference between VCSH and TLT? And which fund is better?

The expense ratio of VCSH is 0.10 percentage points lower than TLT’s (0.05% vs. 0.15%). VCSH is mostly comprised of BBB bonds and TLT has a high exposure to AAA bond. Overall, VCSH has provided lower returns than TLT over the past ten years.

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

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Summary

VCSHTLT
NameVanguard Short-Term Corporate Bond Index Fund ETF SharesiShares 20+ Year Treasury Bond ETF
CategoryShort-Term BondLong Government
IssuerVanguardiShares
AUM47.88B15.15B
Avg. Return3.12%9.00%
Div. Yield1.89%1.5%
Expense Ratio0.05%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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

VCSH’s dividend yield is 0.39% higher than that of TLT (1.89% vs. 1.5%). Also, VCSH yielded on average 5.88% less per year over the past decade (3.12% vs. 9.00%). The expense ratio of VCSH is 0.10 percentage points lower than TLT’s (0.05% vs. 0.15%).

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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.

TLT - Holdings

TLT Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

TLT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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Risk Analysis

VCSHTLT
Mean Return0.240.63
R-squared37.5368.76
Std. Deviation2.3412.76
Alpha0.93-2.83
Beta0.483.54
Sharpe Ratio0.970.55
Treynor Ratio4.751.82

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

The iShares 20+ Year Treasury Bond ETF (TLT) has a Treynor Ratio of 1.82 with a Sharpe Ratio of 0.55 and a Alpha of -2.83. Its Standard Deviation is 12.76 while TLT’s Mean Return is 0.63. Furthermore, the fund has a R-squared of 68.76 and a Beta of 3.54.

VCSH’s Mean Return is 0.39 points lower than that of TLT and its R-squared is 31.23 points lower. With a Standard Deviation of 2.34, VCSH is slightly less volatile than TLT. The Alpha and Beta of VCSH are 3.76 points higher and 3.06 points lower than TLT’s Alpha and Beta.

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Performance

Annual Returns

VCSH vs. TLT - Annual Returns

YearVCSHTLT
20205.08%17.92%
20196.85%14.93%
20180.91%-2.07%
20172.45%8.92%
20162.63%1.36%
20151.25%-1.65%
20141.96%27.35%
20131.37%-13.91%
20125.74%3.25%
20112.94%33.6%
20105.51%9.25%

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 TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.

Portfolio Growth

VCSH vs. TLT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VCSH$10,000$13,5693.12%
TLT$10,000$21,7939.00%

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 TLT, the end total would have been $21,793. This equates to a $11,793 profit over 10 years and a compound annual growth rate (CAGR) of 9.00%.

VCSH’s CAGR is 5.88 percentage points lower than that of TLT and as a result, would have yielded $8,224 less on a $10,000 investment. Thus, VCSH performed worse than TLT by 5.88% annually.


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