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VUG vs. VCIT: What’s The Difference?

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

The expense ratio of VUG is 0.01 percentage points lower than VCIT’s (0.04% vs. 0.05%). VUG also has a high exposure to the technology sector while VCIT is mostly comprised of BBB bonds. Overall, VUG has provided higher returns than VCIT over the past ten years.

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

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Summary

VUGVCIT
NameVanguard Growth Index Fund ETF SharesVanguard Intermediate-Term Corporate Bond Index Fund ETF Shares
CategoryLarge GrowthCorporate Bond
IssuerVanguardVanguard
AUM165.53B48.39B
Avg. Return17.58%5.84%
Div. Yield0.57%2.33%
Expense Ratio0.04%0.05%

The Vanguard Growth Index Fund ETF Shares (VUG) is a Large Growth fund that is issued by Vanguard. It currently has 165.53B total assets under management and has yielded an average annual return of 17.58% over the past 10 years. The fund has a dividend yield of 0.57% 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%.

VUG’s dividend yield is 1.76% lower than that of VCIT (0.57% vs. 2.33%). Also, VUG yielded on average 11.74% more per year over the past decade (17.58% vs. 5.84%). The expense ratio of VUG is 0.01 percentage points lower than VCIT’s (0.04% vs. 0.05%).

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Fund Composition

Holdings

VUG - Holdings

VUG HoldingsWeight
Apple Inc10.13%
Microsoft Corp9.52%
Amazon.com Inc6.88%
Facebook Inc Class A3.89%
Alphabet Inc Class A3.43%
Alphabet Inc Class C3.22%
Tesla Inc2.44%
NVIDIA Corp2.21%
Visa Inc Class A1.78%
PayPal Holdings Inc1.6%

VUG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.13%, 9.52%, 6.88%, 3.89%, and 3.43%.

Alphabet Inc Class C (3.22%), Tesla Inc (2.44%), and NVIDIA Corp (2.21%) have a slightly smaller but still significant weight. Visa Inc Class A and PayPal Holdings Inc are also represented in the VUG’s holdings at 1.78% and 1.6%.

VCIT - Holdings

VCIT Bond SectorsWeight
BBB55.28%
A37.85%
AA5.22%
AAA1.57%
Below B0.08%
Others0.0%
B0.0%
BB0.0%
US Government0.0%

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.

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Risk Analysis

VUGVCIT
Mean Return1.440.44
R-squared92.4863.18
Std. Deviation14.765.08
Alpha1.810.89
Beta1.041.35
Sharpe Ratio1.130.91
Treynor Ratio16.133.43

The Vanguard Growth Index Fund ETF Shares (VUG) has a Standard Deviation of 14.76 with a Mean Return of 1.44 and a R-squared of 92.48. Its Beta is 1.04 while VUG’s Treynor Ratio is 16.13. Furthermore, the fund has a Sharpe Ratio of 1.13 and a Alpha of 1.81.

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

VUG’s Mean Return is 1.00 points higher than that of VCIT and its R-squared is 29.30 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than VCIT. The Alpha and Beta of VUG are 0.92 points higher and 0.31 points lower than VCIT’s Alpha and Beta.

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Performance

Annual Returns

VUG vs. VCIT - Annual Returns

YearVUGVCIT
202040.16%9.55%
201937.26%13.97%
2018-3.32%-1.75%
201727.8%5.5%
20166.13%5.3%
20153.32%0.88%
201413.62%7.47%
201332.38%-1.8%
201217.03%11.36%
20111.87%7.94%
201017.11%10.65%

VUG had its best year in 2020 with an annual return of 40.16%. VUG’s worst year over the past decade yielded -3.32% and occurred in 2018. In most years the Vanguard Growth Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 13.62%, 17.03%, and 17.11% 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

VUG vs. VCIT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VUG$10,000$46,73817.58%
VCIT$10,000$17,4395.84%

A $10,000 investment in VUG would have resulted in a final balance of $46,738. This is a profit of $36,738 over 10 years and amounts to a compound annual growth rate (CAGR) of 17.58%.

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%.

VUG’s CAGR is 11.74 percentage points higher than that of VCIT and as a result, would have yielded $29,299 more on a $10,000 investment. Thus, VUG outperformed VCIT by 11.74% annually.


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