VIG vs. VCIT: What’s The Difference?

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) are both among the Top 100 ETFs. VIG is a Vanguard Large Blend fund and VCIT is a Vanguard Corporate Bond fund. So, what’s the difference between VIG and VCIT? And which fund is better?

The expense ratio of VIG is 0.01 percentage points higher than VCIT’s (0.06% vs. 0.05%). VIG also has a high exposure to the industrials sector while VCIT is mostly comprised of BBB bonds. Overall, VIG has provided higher returns than VCIT over the past ten years.

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

Summary

VIG VCIT
Name Vanguard Dividend Appreciation Index Fund ETF Shares Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares
Category Large Blend Corporate Bond
Issuer Vanguard Vanguard
AUM 71.92B 48.39B
Avg. Return 13.35% 5.84%
Div. Yield 1.56% 2.33%
Expense Ratio 0.06% 0.05%

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) is a Large Blend fund that is issued by Vanguard. It currently has 71.92B total assets under management and has yielded an average annual return of 13.35% over the past 10 years. The fund has a dividend yield of 1.56% with an expense ratio of 0.06%.

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%.

VIG’s dividend yield is 0.77% lower than that of VCIT (1.56% vs. 2.33%). Also, VIG yielded on average 7.50% more per year over the past decade (13.35% vs. 5.84%). The expense ratio of VIG is 0.01 percentage points higher than VCIT’s (0.06% vs. 0.05%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Holdings

VIG - Holdings

VIG Holdings Weight
Microsoft Corp 4.19%
JPMorgan Chase & Co 3.8%
Johnson & Johnson 3.67%
Walmart Inc 3.38%
Visa Inc Class A 3.22%
UnitedHealth Group Inc 3.22%
The Home Depot Inc 2.91%
Procter & Gamble Co 2.82%
Comcast Corp Class A 2.21%
Coca-Cola Co 1.98%

VIG’s Top Holdings are Microsoft Corp, JPMorgan Chase & Co, Johnson & Johnson, Walmart Inc, and Visa Inc Class A at 4.19%, 3.8%, 3.67%, 3.38%, and 3.22%.

UnitedHealth Group Inc (3.22%), The Home Depot Inc (2.91%), and Procter & Gamble Co (2.82%) have a slightly smaller but still significant weight. Comcast Corp Class A and Coca-Cola Co are also represented in the VIG’s holdings at 2.21% and 1.98%.

VCIT - Holdings

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.

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).

Risk Analysis

VIG VCIT
Mean Return 1.09 0.44
R-squared 92.2 63.18
Std. Deviation 12.25 5.08
Alpha 0.12 0.89
Beta 0.86 1.35
Sharpe Ratio 1.01 0.91
Treynor Ratio 14.33 3.43

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a Beta of 0.86 with a Sharpe Ratio of 1.01 and a Mean Return of 1.09. Its Treynor Ratio is 14.33 while VIG’s Alpha is 0.12. Furthermore, the fund has a Standard Deviation of 12.25 and a R-squared of 92.2.

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Standard Deviation of 5.08 with a Beta of 1.35 and a Alpha of 0.89. Its Mean Return is 0.44 while VCIT’s Treynor Ratio is 3.43. Furthermore, the fund has a R-squared of 63.18 and a Sharpe Ratio of 0.91.

VIG’s Mean Return is 0.65 points higher than that of VCIT and its R-squared is 29.02 points higher. With a Standard Deviation of 12.25, VIG is slightly more volatile than VCIT. The Alpha and Beta of VIG are 0.77 points lower and 0.49 points lower than VCIT’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

VIG vs. VCIT - Annual Returns

Year VIG VCIT
2020 15.46% 9.55%
2019 29.71% 13.97%
2018 -2.02% -1.75%
2017 22.22% 5.5%
2016 11.84% 5.3%
2015 -1.95% 0.88%
2014 10.06% 7.47%
2013 28.99% -1.8%
2012 11.61% 11.36%
2011 6.21% 7.94%
2010 14.67% 10.65%

VIG had its best year in 2019 with an annual return of 29.71%. VIG’s worst year over the past decade yielded -2.02% and occurred in 2018. In most years the Vanguard Dividend Appreciation Index Fund ETF Shares provided moderate returns such as in 2012, 2016, and 2010 where annual returns amounted to 11.61%, 11.84%, and 14.67% 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

VIG vs. VCIT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VIG $10,000 $33,096 13.35%
VCIT $10,000 $17,439 5.84%

A $10,000 investment in VIG would have resulted in a final balance of $33,096. This is a profit of $23,096 over 10 years and amounts to a compound annual growth rate (CAGR) of 13.35%.

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%.

VIG’s CAGR is 7.50 percentage points higher than that of VCIT and as a result, would have yielded $15,657 more on a $10,000 investment. Thus, VIG outperformed VCIT by 7.50% annually.


Current recommendations:

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) 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!

2) 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!).

3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply