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VCSH vs. VEU: What’s The Difference?

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) and the Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) are both among the Top 100 ETFs. VCSH is a Vanguard Short-Term Bond fund and VEU is a Vanguard Foreign Large Blend fund. So, what’s the difference between VCSH and VEU? And which fund is better?

The expense ratio of VCSH is 0.03 percentage points lower than VEU’s (0.05% vs. 0.08%). VCSH is mostly comprised of BBB bonds while VEU has a high exposure to the financial services sector. Overall, VCSH has provided lower returns than VEU over the past ten years.

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

VCSHVEU
NameVanguard Short-Term Corporate Bond Index Fund ETF SharesVanguard FTSE All-World ex-US Index Fund ETF Shares
CategoryShort-Term BondForeign Large Blend
IssuerVanguardVanguard
AUM47.88B53.64B
Avg. Return3.12%6.64%
Div. Yield1.89%2.31%
Expense Ratio0.05%0.08%

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 Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.

VCSH’s dividend yield is 0.42% lower than that of VEU (1.89% vs. 2.31%). Also, VCSH yielded on average 3.52% less per year over the past decade (3.12% vs. 6.64%). The expense ratio of VCSH is 0.03 percentage points lower than VEU’s (0.05% vs. 0.08%).

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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.

VEU - Holdings

VEU HoldingsWeight
Tencent Holdings Ltd1.57%
Alibaba Group Holding Ltd Ordinary Shares1.4%
Nestle SA1.22%
Taiwan Semiconductor Manufacturing Co Ltd0.98%
ASML Holding NV0.95%
Taiwan Semiconductor Manufacturing Co Ltd ADR0.91%
Roche Holding AG0.91%
Toyota Motor Corp0.75%
LVMH Moet Hennessy Louis Vuitton SE0.68%
Novartis AG0.67%

VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.

Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.

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Risk Analysis

VCSHVEU
Mean Return0.240.56
R-squared37.5398.44
Std. Deviation2.3415.08
Alpha0.930.28
Beta0.480.99
Sharpe Ratio0.970.4
Treynor Ratio4.755.12

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

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a R-squared of 98.44 with a Standard Deviation of 15.08 and a Mean Return of 0.56. Its Sharpe Ratio is 0.4 while VEU’s Beta is 0.99. Furthermore, the fund has a Alpha of 0.28 and a Treynor Ratio of 5.12.

VCSH’s Mean Return is 0.32 points lower than that of VEU and its R-squared is 60.91 points lower. With a Standard Deviation of 2.34, VCSH is slightly less volatile than VEU. The Alpha and Beta of VCSH are 0.65 points higher and 0.51 points lower than VEU’s Alpha and Beta.

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Performance

Annual Returns

VCSH vs. VEU - Annual Returns

YearVCSHVEU
20205.08%11.39%
20196.85%21.63%
20180.91%-13.97%
20172.45%27.27%
20162.63%4.77%
20151.25%-4.67%
20141.96%-4.05%
20131.37%14.5%
20125.74%18.55%
20112.94%-14.25%
20105.51%11.85%

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 2017 was the strongest year for VEU, returning 27.27% on an annual basis. The poorest year for VEU in the last ten years was 2011, with a yield of -14.25%. Most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares has given investors modest returns, such as in 2016, 2020, and 2010, when gains were 4.77%, 11.39%, and 11.85% respectively.

Portfolio Growth

VCSH vs. VEU - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VCSH$10,000$13,5693.12%
VEU$10,000$16,5466.64%

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 VEU, the end total would have been $16,546. This equates to a $6,546 profit over 10 years and a compound annual growth rate (CAGR) of 6.64%.

VCSH’s CAGR is 3.52 percentage points lower than that of VEU and as a result, would have yielded $2,977 less on a $10,000 investment. Thus, VCSH performed worse than VEU by 3.52% annually.


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