VIG vs. VCSH: What’s The Difference?

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

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

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

Summary

VIG VCSH
Name Vanguard Dividend Appreciation Index Fund ETF Shares Vanguard Short-Term Corporate Bond Index Fund ETF Shares
Category Large Blend Short-Term Bond
Issuer Vanguard Vanguard
AUM 71.92B 47.88B
Avg. Return 13.35% 3.12%
Div. Yield 1.56% 1.89%
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 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%.

VIG’s dividend yield is 0.33% lower than that of VCSH (1.56% vs. 1.89%). Also, VIG yielded on average 10.23% more per year over the past decade (13.35% vs. 3.12%). The expense ratio of VIG is 0.01 percentage points higher than VCSH’s (0.06% vs. 0.05%).

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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%.

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.

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Risk Analysis

VIG VCSH
Mean Return 1.09 0.24
R-squared 92.2 37.53
Std. Deviation 12.25 2.34
Alpha 0.12 0.93
Beta 0.86 0.48
Sharpe Ratio 1.01 0.97
Treynor Ratio 14.33 4.75

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

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

VIG’s Mean Return is 0.85 points higher than that of VCSH and its R-squared is 54.67 points higher. With a Standard Deviation of 12.25, VIG is slightly more volatile than VCSH. The Alpha and Beta of VIG are 0.81 points lower and 0.38 points higher than VCSH’s Alpha and Beta.

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Performance

Annual Returns

VIG vs. VCSH - Annual Returns

Year VIG VCSH
2020 15.46% 5.08%
2019 29.71% 6.85%
2018 -2.02% 0.91%
2017 22.22% 2.45%
2016 11.84% 2.63%
2015 -1.95% 1.25%
2014 10.06% 1.96%
2013 28.99% 1.37%
2012 11.61% 5.74%
2011 6.21% 2.94%
2010 14.67% 5.51%

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 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

VIG vs. VCSH - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VIG $10,000 $33,096 13.35%
VCSH $10,000 $13,569 3.12%

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 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%.

VIG’s CAGR is 10.23 percentage points higher than that of VCSH and as a result, would have yielded $19,527 more on a $10,000 investment. Thus, VIG outperformed VCSH by 10.23% annually.


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