The Vanguard Information Technology Index Fund ETF Shares (VGT) and the Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) are both among the Top 100 ETFs. VGT is a Vanguard Technology fund and VCSH is a Vanguard Short-Term Bond fund. So, what’s the difference between VGT and VCSH? And which fund is better?
The expense ratio of VGT is 0.05 percentage points higher than VCSH’s (0.1% vs. 0.05%). VGT also has a high exposure to the technology sector while VCSH is mostly comprised of BBB bonds. Overall, VGT has provided higher returns than VCSH over the past ten years.
In this article, we’ll compare VGT vs. VCSH. We’ll look at industry exposure and risk metrics, as well as at their annual returns and holdings. Moreover, I’ll also discuss VGT’s and VCSH’s portfolio growth, performance, and fund composition and examine how these affect their overall returns.
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Summary
| VGT | VCSH | |
| NameVanguard Information Technology Index Fund ETF SharesVanguard Short-Term Corporate Bond Index Fund ETF Shares | ||
| Category | Technology | Short-Term Bond |
| Issuer | Vanguard | Vanguard |
| AUM | 54.13B | 47.88B |
| Avg. Return | 20.84% | 3.12% |
| Div. Yield | 0.66% | 1.89% |
| Expense Ratio | 0.1% | 0.05% |
The Vanguard Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.
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%.
VGT’s dividend yield is 1.23% lower than that of VCSH (0.66% vs. 1.89%). Also, VGT yielded on average 17.72% more per year over the past decade (20.84% vs. 3.12%). The expense ratio of VGT is 0.05 percentage points higher than VCSH’s (0.1% vs. 0.05%).
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Fund Composition
Holdings
| VGT Holdings | Weight |
| Apple Inc | 19.58% |
| Microsoft Corp | 16.53% |
| NVIDIA Corp | 4.22% |
| Visa Inc Class A | 3.16% |
| PayPal Holdings Inc | 2.76% |
| Mastercard Inc Class A | 2.76% |
| Adobe Inc | 2.39% |
| Intel Corp | 1.94% |
| Salesforce.com Inc | 1.91% |
| Cisco Systems Inc | 1.9% |
VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.
Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.
| 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.
Risk Analysis
| VGT | VCSH | |
| Mean Return | 1.76 | 0.24 |
| R-squared | 74.84 | 37.53 |
| Std. Deviation | 16.61 | 2.34 |
| Alpha | 10.41 | 0.93 |
| Beta | 1.02 | 0.48 |
| Sharpe Ratio | 1.23 | 0.97 |
| Treynor Ratio | 20.55 | 4.75 |
The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Sharpe Ratio of 1.23 with a Beta of 1.02 and a R-squared of 74.84. Its Mean Return is 1.76 while VGT’s Treynor Ratio is 20.55. Furthermore, the fund has a Alpha of 10.41 and a Standard Deviation of 16.61.
The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) has a Mean Return of 0.24 with a Standard Deviation of 2.34 and a Sharpe Ratio of 0.97. Its Treynor Ratio is 4.75 while VCSH’s Beta is 0.48. Furthermore, the fund has a Alpha of 0.93 and a R-squared of 37.53.
VGT’s Mean Return is 1.52 points higher than that of VCSH and its R-squared is 37.31 points higher. With a Standard Deviation of 16.61, VGT is slightly more volatile than VCSH. The Alpha and Beta of VGT are 9.48 points higher and 0.54 points higher than VCSH’s Alpha and Beta.
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Performance
Annual Returns
| Year | VGT | VCSH |
| 2020 | 45.94% | 5.08% |
| 2019 | 48.68% | 6.85% |
| 2018 | 2.52% | 0.91% |
| 2017 | 37.07% | 2.45% |
| 2016 | 13.73% | 2.63% |
| 2015 | 5.02% | 1.25% |
| 2014 | 18.01% | 1.96% |
| 2013 | 30.91% | 1.37% |
| 2012 | 14.05% | 5.74% |
| 2011 | 0.52% | 2.94% |
| 2010 | 12.74% | 5.51% |
VGT had its best year in 2019 with an annual return of 48.68%. VGT’s worst year over the past decade yielded 0.52% and occurred in 2011. In most years the Vanguard Information Technology Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 13.73%, 14.05%, and 18.01% respectively.
The year 2019 was the strongest year for VCSH, returning 6.85% on an annual basis. The poorest year for VCSH in the last ten years was 2018, with a yield of 0.91%. Most years the Vanguard Short-Term Corporate Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2016, and 2011, when gains were 2.45%, 2.63%, and 2.94% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VGT | $10,000 | $64,500 | 20.84% |
| VCSH | $10,000 | $13,569 | 3.12% |
A $10,000 investment in VGT would have resulted in a final balance of $64,500. This is a profit of $54,500 over 10 years and amounts to a compound annual growth rate (CAGR) of 20.84%.
With a $10,000 investment in VCSH, the end total would have been $13,569. This equates to a $3,569 profit over 10 years and a compound annual growth rate (CAGR) of 3.12%.
VGT’s CAGR is 17.72 percentage points higher than that of VCSH and as a result, would have yielded $50,931 more on a $10,000 investment. Thus, VGT outperformed VCSH by 17.72% annually.
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