VCSH vs. VYM: What’s The Difference?

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) and the Vanguard High Dividend Yield Index Fund ETF Shares (VYM) are both among the Top 100 ETFs. VCSH is a Vanguard Short-Term Bond fund and VYM is a Vanguard Large Value fund. So, what’s the difference between VCSH and VYM? And which fund is better?

The expense ratio of VCSH is 0.01 percentage points lower than VYM’s (0.05% vs. 0.06%). VCSH is mostly comprised of BBB bonds while VYM has a high exposure to the financial services sector. Overall, VCSH has provided lower returns than VYM over the past ten years.

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

Summary

VCSH VYM
Name Vanguard Short-Term Corporate Bond Index Fund ETF Shares Vanguard High Dividend Yield Index Fund ETF Shares
Category Short-Term Bond Large Value
Issuer Vanguard Vanguard
AUM 47.88B 48.5B
Avg. Return 3.12% 12.20%
Div. Yield 1.89% 2.79%
Expense Ratio 0.05% 0.06%

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 High Dividend Yield Index Fund ETF Shares (VYM) is a Large Value fund that is issued by Vanguard. It currently has 48.5B total assets under management and has yielded an average annual return of 12.20% over the past 10 years. The fund has a dividend yield of 2.79% with an expense ratio of 0.06%.

VCSH’s dividend yield is 0.90% lower than that of VYM (1.89% vs. 2.79%). Also, VCSH yielded on average 9.08% less per year over the past decade (3.12% vs. 12.20%). The expense ratio of VCSH is 0.01 percentage points lower than VYM’s (0.05% vs. 0.06%).

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.

VYM - Holdings

VYM Holdings Weight
JPMorgan Chase & Co 3.53%
Johnson & Johnson 3.28%
The Home Depot Inc 2.59%
Procter & Gamble Co 2.48%
Bank of America Corp 2.35%
Exxon Mobil Corp 2.02%
Comcast Corp Class A 1.96%
Verizon Communications Inc 1.75%
Intel Corp 1.71%
Cisco Systems Inc 1.69%

VYM’s Top Holdings are JPMorgan Chase & Co, Johnson & Johnson, The Home Depot Inc, Procter & Gamble Co, and Bank of America Corp at 3.53%, 3.28%, 2.59%, 2.48%, and 2.35%.

Exxon Mobil Corp (2.02%), Comcast Corp Class A (1.96%), and Verizon Communications Inc (1.75%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the VYM’s holdings at 1.71% and 1.69%.

Risk Analysis

VCSH VYM
Mean Return 0.24 1.04
R-squared 37.53 88.88
Std. Deviation 2.34 12.69
Alpha 0.93 -0.7
Beta 0.48 0.88
Sharpe Ratio 0.97 0.93
Treynor Ratio 4.75 13.24

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

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a Mean Return of 1.04 with a Sharpe Ratio of 0.93 and a Treynor Ratio of 13.24. Its Beta is 0.88 while VYM’s Standard Deviation is 12.69. Furthermore, the fund has a Alpha of -0.7 and a R-squared of 88.88.

VCSH’s Mean Return is 0.80 points lower than that of VYM and its R-squared is 51.35 points lower. With a Standard Deviation of 2.34, VCSH is slightly less volatile than VYM. The Alpha and Beta of VCSH are 1.63 points higher and 0.40 points lower than VYM’s Alpha and Beta.

Performance

Annual Returns

VCSH vs. VYM - Annual Returns

Year VCSH VYM
2020 5.08% 1.14%
2019 6.85% 24.2%
2018 0.91% -5.87%
2017 2.45% 16.42%
2016 2.63% 16.87%
2015 1.25% 0.33%
2014 1.96% 13.47%
2013 1.37% 30.26%
2012 5.74% 12.68%
2011 2.94% 10.5%
2010 5.51% 14.17%

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 VYM, returning 30.26% on an annual basis. The poorest year for VYM in the last ten years was 2018, with a yield of -5.87%. Most years the Vanguard High Dividend Yield Index Fund ETF Shares has given investors modest returns, such as in 2012, 2014, and 2010, when gains were 12.68%, 13.47%, and 14.17% respectively.

Portfolio Growth

VCSH vs. VYM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCSH $10,000 $13,569 3.12%
VYM $10,000 $29,705 12.20%

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 VYM, the end total would have been $29,705. This equates to a $19,705 profit over 10 years and a compound annual growth rate (CAGR) of 12.20%.

VCSH’s CAGR is 9.08 percentage points lower than that of VYM and as a result, would have yielded $16,136 less on a $10,000 investment. Thus, VCSH performed worse than VYM by 9.08% annually.


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