Investing in Bond ETFs? Here's How MUB and VCIT Stack Up.
Key Points
VCIT and MUB both keep expenses low, but VCIT delivers a higher yield and slightly better 1-year return.
MUB’s municipal bonds showed a much shallower five-year drawdown than VCIT’s corporates, which signals lower historical risk.
MUB holds over 6,000 muni bonds for broad diversification, while VCIT focuses on investment-grade corporate bonds.
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The Vanguard Intermediate-Term Corporate Bond ETF (NASDAQ:VCIT) and the iShares National Muni Bond ETF (NYSEMKT:MUB) both offer low-cost access to investment-grade bonds, but VCIT features a higher yield and greater interest rate sensitivity, while MUB brings broader diversification and lower historical drawdown risk.
Both VCIT and MUB target high-quality U.S. fixed income, but with different investor goals in mind: VCIT tilts toward corporate bonds for higher income potential, while MUB focuses on municipal bonds, appealing to those seeking tax advantages and diversification. This comparison highlights their structural and performance trade-offs.
Snapshot (cost & size)
| Metric | VCIT | MUB |
|---|---|---|
| Issuer | Vanguard | iShares |
| Expense ratio | 0.03% | 0.05% |
| 1-yr return (as of 3/26/2026) | 6.53% | 4.39% |
| Dividend yield | 4.96% | 3.29% |
| Beta | 1.06 | 0.9 |
| AUM | $68.5 billion | $42.4 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 30-day SEC yield as of March 24 for VCIT and March 25 for MUB.
Both funds are low-cost, with VCIT slightly more affordable on expense ratio and offering a higher yield, which may appeal to income-focused investors willing to accept more interest rate sensitivity.
Performance & risk comparison
| Metric | VCIT | MUB |
|---|---|---|
| Max drawdown (5 y) | -20.57% | -11.89% |
| Growth of $1,000 over 5 years | $1,075 | $1,041 |
What's inside
MUB holds over 6,000 investment-grade municipal bonds, providing broad exposure across the U.S. muni market. With an 18.5-year track record, MUB is designed for investors seeking diversified, tax-aware bond income, and its holdings span a wide range of maturities and geographies.
VCIT, by contrast, invests in over 2,000 investment-grade corporate bonds, with a sector allocation entirely in cash and other fixed income instruments. VCIT’s focus on corporates means more exposure to credit risk and generally higher yields than municipal bonds.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Bonds offer portfolio diversification, capital preservation, and consistent income, all of which may appeal to investors, particularly in the current uncertain market environment. Both VCIT and MUB offer exposure to investment-grade bonds and low expense ratios, meaning you’re not taking on much risk or paying high fees.
The main difference between the two ETFs is the type of bonds they hold. VCIT holds corporate bonds with a weighted average maturity of 7.4 years and tracks the Bloomberg US 5-10 Year Corp Index. These bonds typically come with higher yields to offset slightly elevated credit risk, which is why VCIT’s return, yield, and max drawdown are all higher than MUB’s.
MUB tracks the ICE AMT-Free US National Municipal Index and holds a large universe of municipal bonds with a weighted average maturity of 7.27 years. While the ETF’s one-year return and dividend yield may not be as exciting as VCIT’s, it does have something else going for it. Interest income from municipal bonds are free from federal — and often state and local — taxes, giving investors another way to preserve capital while realizing some potential upside and cashing in on regular income.
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Sarah Sidlow has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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