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VCSH vs. TQQQ: What’s The Difference?

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. VCSH is a Vanguard Short-Term Bond fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between VCSH and TQQQ? And which fund is better?

The expense ratio of VCSH is 0.90 percentage points lower than TQQQ’s (0.05% vs. 0.95%). VCSH is mostly comprised of BBB bonds while TQQQ has a high exposure to the technology sector. Overall, VCSH has provided lower returns than TQQQ over the past ten years.

Introduction To Mutual Funds
Introduction To Mutual Funds

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

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Summary

VCSHTQQQ
NameVanguard Short-Term Corporate Bond Index Fund ETF SharesProShares UltraPro QQQ
CategoryShort-Term BondTrading–Leveraged Equity
IssuerVanguardProShares
AUM47.88B12.41B
Avg. Return3.12%61.22%
Div. Yield1.89%0.0%
Expense Ratio0.05%0.95%

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 ProShares UltraPro QQQ (TQQQ) is a Trading–Leveraged Equity fund that is issued by ProShares. It currently has 12.41B total assets under management and has yielded an average annual return of 61.22% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.95%.

VCSH’s dividend yield is 1.89% higher than that of TQQQ (1.89% vs. 0.0%). Also, VCSH yielded on average 58.10% less per year over the past decade (3.12% vs. 61.22%). The expense ratio of VCSH is 0.90 percentage points lower than TQQQ’s (0.05% vs. 0.95%).

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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.

TQQQ - Holdings

TQQQ HoldingsWeight
Nasdaq 100 Index Swap Goldman Sachs International45.11%
Nasdaq 100 Index Swap Societe Generale44.73%
Nasdaq 100 Index Swap Bnp Paribas38.05%
Nasdaq 100 Index Swap Bank Of America Na31.53%
Nasdaq 100 Index Swap Citibank Na31.49%
Nasdaq 100 Index Swap Jp Morgan Securities26.2%
Apple Inc7.49%
Microsoft Corp6.69%
Nasdaq 100 Index Swap Credit Suisse International5.9%
Amazon.com Inc5.68%

TQQQ’s Top Holdings are Nasdaq 100 Index Swap Goldman Sachs International, Nasdaq 100 Index Swap Societe Generale, Nasdaq 100 Index Swap Bnp Paribas, Nasdaq 100 Index Swap Bank Of America Na, and Nasdaq 100 Index Swap Citibank Na at 45.11%, 44.73%, 38.05%, 31.53%, and 31.49%.

Nasdaq 100 Index Swap Jp Morgan Securities (26.2%), Apple Inc (7.49%), and Microsoft Corp (6.69%) have a slightly smaller but still significant weight. Nasdaq 100 Index Swap Credit Suisse International and Amazon.com Inc are also represented in the TQQQ’s holdings at 5.9% and 5.68%.

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Risk Analysis

VCSHTQQQ
Mean Return0.244.65
R-squared37.5383.64
Std. Deviation2.3450.08
Alpha0.937.29
Beta0.483.37
Sharpe Ratio0.971.1
Treynor Ratio4.7515.65

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

The ProShares UltraPro QQQ (TQQQ) has a R-squared of 83.64 with a Standard Deviation of 50.08 and a Sharpe Ratio of 1.1. Its Mean Return is 4.65 while TQQQ’s Treynor Ratio is 15.65. Furthermore, the fund has a Beta of 3.37 and a Alpha of 7.29.

VCSH’s Mean Return is 4.41 points lower than that of TQQQ and its R-squared is 46.11 points lower. With a Standard Deviation of 2.34, VCSH is slightly less volatile than TQQQ. The Alpha and Beta of VCSH are 6.36 points lower and 2.89 points lower than TQQQ’s Alpha and Beta.

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Performance

Annual Returns

VCSH vs. TQQQ - Annual Returns

YearVCSHTQQQ
20205.08%109.85%
20196.85%133.93%
20180.91%-19.65%
20172.45%118.65%
20162.63%11.04%
20151.25%17.41%
20141.96%56.82%
20131.37%139.98%
20125.74%51.95%
20112.94%-7.77%
20105.51%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 TQQQ, returning 139.98% on an annual basis. The poorest year for TQQQ in the last ten years was 2018, with a yield of -19.65%. Most years the ProShares UltraPro QQQ has given investors modest returns, such as in 2015, 2012, and 2014, when gains were 17.41%, 51.95%, and 56.82% respectively.

Portfolio Growth

VCSH vs. TQQQ - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VCSH$10,000$13,5693.12%
TQQQ$10,000$593,01261.22%

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 TQQQ, the end total would have been $593,012. This equates to a $583,012 profit over 10 years and a compound annual growth rate (CAGR) of 61.22%.

VCSH’s CAGR is 58.10 percentage points lower than that of TQQQ and as a result, would have yielded $579,443 less on a $10,000 investment. Thus, VCSH performed worse than TQQQ by 58.10% annually.


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