The Vanguard Growth Index Fund ETF Shares (VUG) and the Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and VCSH is a Vanguard Short-Term Bond fund. So, what’s the difference between VUG and VCSH? And which fund is better?
The expense ratio of VUG is 0.01 percentage points lower than VCSH’s (0.04% vs. 0.05%). VUG also has a high exposure to the technology sector while VCSH is mostly comprised of BBB bonds. Overall, VUG has provided higher returns than VCSH over the past ten years.
In this article, we’ll compare VUG vs. VCSH. We’ll look at industry exposure and holdings, as well as at their risk metrics and performance. Moreover, I’ll also discuss VUG’s and VCSH’s annual returns, fund composition, and portfolio growth and examine how these affect their overall returns.
Summary
| VUG | VCSH | |
| Name | Vanguard Growth Index Fund ETF Shares | Vanguard Short-Term Corporate Bond Index Fund ETF Shares |
| Category | Large Growth | Short-Term Bond |
| Issuer | Vanguard | Vanguard |
| AUM | 165.53B | 47.88B |
| Avg. Return | 17.58% | 3.12% |
| Div. Yield | 0.57% | 1.89% |
| Expense Ratio | 0.04% | 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 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%.
VUG’s dividend yield is 1.32% lower than that of VCSH (0.57% vs. 1.89%). Also, VUG yielded on average 14.46% more per year over the past decade (17.58% vs. 3.12%). The expense ratio of VUG is 0.01 percentage points lower than VCSH’s (0.04% vs. 0.05%).
Fund Composition
Holdings
| VUG Holdings | Weight |
| Apple Inc | 10.13% |
| Microsoft Corp | 9.52% |
| Amazon.com Inc | 6.88% |
| Facebook Inc Class A | 3.89% |
| Alphabet Inc Class A | 3.43% |
| Alphabet Inc Class C | 3.22% |
| Tesla Inc | 2.44% |
| NVIDIA Corp | 2.21% |
| Visa Inc Class A | 1.78% |
| PayPal Holdings Inc | 1.6% |
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%.
| 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
| VUG | VCSH | |
| Mean Return | 1.44 | 0.24 |
| R-squared | 92.48 | 37.53 |
| Std. Deviation | 14.76 | 2.34 |
| Alpha | 1.81 | 0.93 |
| Beta | 1.04 | 0.48 |
| Sharpe Ratio | 1.13 | 0.97 |
| Treynor Ratio | 16.13 | 4.75 |
The Vanguard Growth Index Fund ETF Shares (VUG) has a Beta of 1.04 with a Mean Return of 1.44 and a Sharpe Ratio of 1.13. Its R-squared is 92.48 while VUG’s Standard Deviation is 14.76. Furthermore, the fund has a Alpha of 1.81 and a Treynor Ratio of 16.13.
The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) has a Standard Deviation of 2.34 with a Beta of 0.48 and a Sharpe Ratio of 0.97. Its Mean Return is 0.24 while VCSH’s R-squared is 37.53. Furthermore, the fund has a Treynor Ratio of 4.75 and a Alpha of 0.93.
VUG’s Mean Return is 1.20 points higher than that of VCSH and its R-squared is 54.95 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than VCSH. The Alpha and Beta of VUG are 0.88 points higher and 0.56 points higher than VCSH’s Alpha and Beta.
Performance
Annual Returns
| Year | VUG | VCSH |
| 2020 | 40.16% | 5.08% |
| 2019 | 37.26% | 6.85% |
| 2018 | -3.32% | 0.91% |
| 2017 | 27.8% | 2.45% |
| 2016 | 6.13% | 2.63% |
| 2015 | 3.32% | 1.25% |
| 2014 | 13.62% | 1.96% |
| 2013 | 32.38% | 1.37% |
| 2012 | 17.03% | 5.74% |
| 2011 | 1.87% | 2.94% |
| 2010 | 17.11% | 5.51% |
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 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 |
| VUG | $10,000 | $46,738 | 17.58% |
| VCSH | $10,000 | $13,569 | 3.12% |
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 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%.
VUG’s CAGR is 14.46 percentage points higher than that of VCSH and as a result, would have yielded $33,169 more on a $10,000 investment. Thus, VUG outperformed VCSH by 14.46% annually.
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