The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and VCIT is a Vanguard Corporate Bond fund. So, what’s the difference between VO and VCIT? And which fund is better?
The expense ratio of VO is 0.01 percentage points lower than VCIT’s (0.04% vs. 0.05%). VO also has a high exposure to the technology sector while VCIT is mostly comprised of BBB bonds. Overall, VO has provided higher returns than VCIT over the past ten years.
In this article, we’ll compare VO vs. VCIT. We’ll look at fund composition and risk metrics, as well as at their holdings and performance. Moreover, I’ll also discuss VO’s and VCIT’s portfolio growth, annual returns, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard Mid-Cap Index Fund ETF Shares||Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares|
|Category||Mid-Cap Blend||Corporate Bond|
The Vanguard Mid-Cap Index Fund ETF Shares (VO) is a Mid-Cap Blend fund that is issued by Vanguard. It currently has 154.08B total assets under management and has yielded an average annual return of 14.34% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.04%.
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%.
VO’s dividend yield is 1.10% lower than that of VCIT (1.23% vs. 2.33%). Also, VO yielded on average 8.49% more per year over the past decade (14.34% vs. 5.84%). The expense ratio of VO is 0.01 percentage points lower than VCIT’s (0.04% vs. 0.05%).
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|IDEXX Laboratories Inc||0.78%|
|Marvell Technology Inc||0.68%|
|IQVIA Holdings Inc||0.68%|
|Chipotle Mexican Grill Inc||0.63%|
|Veeva Systems Inc Class A||0.62%|
|Digital Realty Trust Inc||0.62%|
|Carrier Global Corp Ordinary Shares||0.61%|
VO’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Marvell Technology Inc, IQVIA Holdings Inc, and Chipotle Mexican Grill Inc at 0.78%, 0.75%, 0.68%, 0.68%, and 0.63%.
Veeva Systems Inc Class A (0.62%), Digital Realty Trust Inc (0.62%), and Centene Corp (0.62%) have a slightly smaller but still significant weight. Aptiv PLC and Carrier Global Corp Ordinary Shares are also represented in the VO’s holdings at 0.62% and 0.61%.
|VCIT Bond Sectors||Weight|
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.
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The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a Mean Return of 1.14 with a R-squared of 92.22 and a Standard Deviation of 15.65. Its Beta is 1.11 while VO’s Alpha is -2.71. Furthermore, the fund has a Sharpe Ratio of 0.83 and a Treynor Ratio of 11.32.
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Standard Deviation of 5.08 with a Sharpe Ratio of 0.91 and a R-squared of 63.18. Its Treynor Ratio is 3.43 while VCIT’s Beta is 1.35. Furthermore, the fund has a Mean Return of 0.44 and a Alpha of 0.89.
VO’s Mean Return is 0.70 points higher than that of VCIT and its R-squared is 29.04 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than VCIT. The Alpha and Beta of VO are 3.60 points lower and 0.24 points lower than VCIT’s Alpha and Beta.
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VO had its best year in 2013 with an annual return of 35.15%. VO’s worst year over the past decade yielded -9.21% and occurred in 2018. In most years the Vanguard Mid-Cap Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2020 where annual returns amounted to 13.76%, 15.98%, and 18.22% 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VO would have resulted in a final balance of $32,177. This is a profit of $22,177 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.34%.
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%.
VO’s CAGR is 8.49 percentage points higher than that of VCIT and as a result, would have yielded $14,738 more on a $10,000 investment. Thus, VO outperformed VCIT by 8.49% annually.
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