The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and VCIT is a Vanguard Corporate Bond fund. So, what’s the difference between VEA and VCIT? And which fund is better?
VEA and VCIT have the same expense ratio: 0.05%. VEA also has a high exposure to the financial services sector while VCIT is mostly comprised of BBB bonds. Overall, VEA has provided higher returns than VCIT over the past ten years.
In this article, we’ll compare VEA vs. VCIT. We’ll look at performance and holdings, as well as at their fund composition and annual returns. Moreover, I’ll also discuss VEA’s and VCIT’s portfolio growth, risk metrics, and industry exposure and examine how these affect their overall returns.
Summary
| VEA | VCIT | |
| Name | Vanguard FTSE Developed Markets Index Fund ETF Shares | Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares |
| Category | Foreign Large Blend | Corporate Bond |
| Issuer | Vanguard | Vanguard |
| AUM | 157.48B | 48.39B |
| Avg. Return | 7.05% | 5.84% |
| Div. Yield | 2.49% | 2.33% |
| Expense Ratio | 0.05% | 0.05% |
The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 157.48B total assets under management and has yielded an average annual return of 7.05% over the past 10 years. The fund has a dividend yield of 2.49% with an expense ratio of 0.05%.
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) is a Corporate Bond fund that is issued by Vanguard. It currently has 48.39B total assets under management and has yielded an average annual return of 5.84% over the past 10 years. The fund has a dividend yield of 2.33% with an expense ratio of 0.05%.
VEA’s dividend yield is 0.16% higher than that of VCIT (2.49% vs. 2.33%). Also, VEA yielded on average 1.21% more per year over the past decade (7.05% vs. 5.84%). VEA and VCIT have the same expense ratio: 0.05%.
Fund Composition
Holdings
| VEA Holdings | Weight |
| Nestle SA | 1.5% |
| Samsung Electronics Co Ltd | 1.4% |
| ASML Holding NV | 1.16% |
| Roche Holding AG | 1.1% |
| Toyota Motor Corp | 0.92% |
| LVMH Moet Hennessy Louis Vuitton SE | 0.84% |
| Novartis AG | 0.82% |
| Shopify Inc A | 0.7% |
| AstraZeneca PLC | 0.67% |
| SAP SE | 0.66% |
VEA’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.5%, 1.4%, 1.16%, 1.1%, and 0.92%.
LVMH Moet Hennessy Louis Vuitton SE (0.84%), Novartis AG (0.82%), and Shopify Inc A (0.7%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the VEA’s holdings at 0.67% and 0.66%.
| VCIT Bond Sectors | Weight |
| BBB | 55.28% |
| A | 37.85% |
| AA | 5.22% |
| AAA | 1.57% |
| Below B | 0.08% |
| Others | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| US Government | 0.0% |
VCIT’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 55.28%, 37.85%, 5.22%, 1.57%, and 0.08%. The fund is less weighted towards Others (0.0%), B (0.0%), and BB (0.0%) rated bonds.
Performance
Annual Returns
| Year | VEA | VCIT |
| 2020 | 10.29% | 9.55% |
| 2019 | 22.08% | 13.97% |
| 2018 | -14.47% | -1.75% |
| 2017 | 26.44% | 5.5% |
| 2016 | 2.51% | 5.3% |
| 2015 | -0.21% | 0.88% |
| 2014 | -5.71% | 7.47% |
| 2013 | 22.12% | -1.8% |
| 2012 | 18.6% | 11.36% |
| 2011 | -12.57% | 7.94% |
| 2010 | 8.47% | 10.65% |
VEA had its best year in 2017 with an annual return of 26.44%. VEA’s worst year over the past decade yielded -14.47% and occurred in 2018. In most years the Vanguard FTSE Developed Markets Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 2.51%, 8.47%, and 10.29% respectively.
The year 2019 was the strongest year for VCIT, returning 13.97% on an annual basis. The poorest year for VCIT in the last ten years was 2013, with a yield of -1.8%. Most years the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2014, and 2011, when gains were 5.5%, 7.47%, and 7.94% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VEA | $10,000 | $17,784 | 7.05% |
| VCIT | $10,000 | $17,439 | 5.84% |
A $10,000 investment in VEA would have resulted in a final balance of $17,784. This is a profit of $7,784 over 10 years and amounts to a compound annual growth rate (CAGR) of 7.05%.
With a $10,000 investment in VCIT, the end total would have been $17,439. This equates to a $7,439 profit over 10 years and a compound annual growth rate (CAGR) of 5.84%.
VEA’s CAGR is 1.21 percentage points higher than that of VCIT and as a result, would have yielded $345 more on a $10,000 investment. Thus, VEA outperformed VCIT by 1.21% annually.
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