Vanguard Bond ETFs Compared: Should You Buy VCIT's Yield or VGIT's Stability in This Economic Environment?
Key Points
Vanguard Intermediate-Term Corporate Bond ETF and Vanguard Intermediate-Term Treasury ETF both feature an ultra-low 0.03% expense ratio.
Vanguard Intermediate-Term Corporate Bond ETF provides a higher trailing-12-month distribution yield of 4.80% compared to 3.80% for the Treasury-focused fund.
Vanguard Intermediate-Term Treasury ETF has experienced lower volatility and a shallower maximum drawdown of 15% over the last five years.
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Vanguard Intermediate-Term Corporate Bond ETF (NASDAQ:VCIT) offers higher income by holding investment-grade corporate debt, while Vanguard Intermediate-Term Treasury ETF (NASDAQ:VGIT) prioritizes safety through a portfolio of U.S. government-backed securities.
Both funds target the intermediate section of the yield curve, but they serve different roles in a portfolio. While VCIT captures the credit premium of the corporate world, VGIT acts as a more traditional hedge against equity market volatility by sticking strictly to government obligations.
Snapshot (cost & size)
| Metric | VCIT | VGIT |
|---|---|---|
| Issuer | Vanguard | Vanguard |
| Share price (as of 6/30/26) | $82.65 | $58.98 |
| Expense ratio | 0.03% | 0.03% |
| 1-yr return (as of 6/30/26) | 4.50% | 2.40% |
| Dividend yield | 4.8% | 3.8% |
| Beta | 0.33 | 0.17 |
| AUM | $68.7 billion | $49.5 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
Both funds are highly affordable with identical 0.03% expense ratios. However, the corporate focus of the Vanguard fund results in a higher payout, with a yield gap of aout 1 percentage point over the Treasury alternative.
Performance & risk comparison
| Metric | VCIT | VGIT |
|---|---|---|
| Max drawdown (5 yr) | (20.6%) | (16%) |
| Growth of $1,000 over 5 years (total return) | $1,060 | $1,008 |
What's inside
Vanguard Intermediate-Term Treasury ETF primarily holds U.S. Treasury bonds with maturities between three and 10 years. The fund manages 103 holdings. It was launched in 2009. Vanguard Intermediate-Term Treasury ETF has paid $2.27 per share over the trailing 12 months, which on its recent ~$58.98 share price works out to a 3.80% yield.
Vanguard Intermediate-Term Corporate Bond ETF focuses on U.S. dollar-denominated investment-grade bonds from industrial, utility, and financial companies. The fund is highly diversified with 2,283 holdings, and no single position exceeds 0.31% of the portfolio. It was launched in 2009. Vanguard Intermediate-Term Corporate Bond ETF has paid $3.95 per share over the trailing 12 months, which on its recent ~$82.65 share price works out to a 4.80% yield.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Bonds are often seen as a good way to diversify an investment portfolio while generating guaranteed income. Choosing between an ETF that holds U.S. Treasury bonds and one that holds corporate bonds comes down to what you value more: safety or income. U.S. Treasury bonds, backed by the U.S. government, are considered the safest bonds you can hold, as the risk of default is practically zero. However, because of that, the payout is also lower, in this instance by 1 percentage point.
VCIT, which holds corporate bonds, pays a nearly 5% dividend yield; that higher payout is a reflection of the higher risk of default that is assumed with corporate debt. That said, with more than 2,000 holdings, and with top bonds going to Amazon, Boeing, Meta Platforms, and Bank of America, VCIT will give most investors more bang for their buck, with an equally low expense ratio, higher growth, and a higher payout than VGIT.
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Bank of America is an advertising partner of Motley Fool Money. Sarah Sidlow has positions in Bank of America and Meta Platforms. The Motley Fool has positions in and recommends Amazon, Boeing, and Meta Platforms. The Motley Fool has a disclosure policy.
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