The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) and the Vanguard Health Care Index Fund ETF Shares (VHT) are both among the Top 100 ETFs. VCSH is a Vanguard Short-Term Bond fund and VHT is a Vanguard Health fund. So, what’s the difference between VCSH and VHT? And which fund is better?
The expense ratio of VCSH is 0.05 percentage points lower than VHT’s (0.05% vs. 0.1%). VCSH is mostly comprised of BBB bonds while VHT has a high exposure to the healthcare sector. Overall, VCSH has provided lower returns than VHT over the past ten years.
In this article, we’ll compare VCSH vs. VHT. We’ll look at fund composition and industry exposure, as well as at their portfolio growth and holdings. Moreover, I’ll also discuss VCSH’s and VHT’s performance, annual returns, and risk metrics and examine how these affect their overall returns.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
|Name||Vanguard Short-Term Corporate Bond Index Fund ETF Shares||Vanguard Health Care Index Fund ETF Shares|
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 Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.
VCSH’s dividend yield is 0.74% higher than that of VHT (1.89% vs. 1.15%). Also, VCSH yielded on average 12.92% less per year over the past decade (3.12% vs. 16.04%). The expense ratio of VCSH is 0.05 percentage points lower than VHT’s (0.05% vs. 0.1%).
FYI: The best way I've found to invest is through M1 Finance. It's free and you even get an instant line of credit and 100$! Have a look here (link to M1 Finance).
|VCSH Bond Sectors||Weight|
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.
|Johnson & Johnson||7.34%|
|UnitedHealth Group Inc||6.44%|
|Thermo Fisher Scientific Inc||3.37%|
|Merck & Co Inc||3.33%|
|Eli Lilly and Co||3.17%|
VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.
AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.
The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) has a Sharpe Ratio of 0.97 with a Mean Return of 0.24 and a Standard Deviation of 2.34. Its Beta is 0.48 while VCSH’s R-squared is 37.53. Furthermore, the fund has a Treynor Ratio of 4.75 and a Alpha of 0.93.
The Vanguard Health Care Index Fund ETF Shares (VHT) has a Mean Return of 1.33 with a Beta of 0.75 and a Treynor Ratio of 20.74. Its Sharpe Ratio is 1.13 while VHT’s Standard Deviation is 13.58. Furthermore, the fund has a Alpha of 7.99 and a R-squared of 59.86.
VCSH’s Mean Return is 1.09 points lower than that of VHT and its R-squared is 22.33 points lower. With a Standard Deviation of 2.34, VCSH is slightly less volatile than VHT. The Alpha and Beta of VCSH are 7.06 points lower and 0.27 points lower than VHT’s Alpha and Beta.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
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 VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 VHT, the end total would have been $45,829. This equates to a $35,829 profit over 10 years and a compound annual growth rate (CAGR) of 16.04%.
VCSH’s CAGR is 12.92 percentage points lower than that of VHT and as a result, would have yielded $32,260 less on a $10,000 investment. Thus, VCSH performed worse than VHT by 12.92% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.