VCIT Vanguard Intermediate-Term Corporate Bond ETF gives you exposure to investment-grade corporate bonds. VCIT tracks the Bloomberg Barclays U.S. 5-10 Year Corporate Bond Index. VCIT covers over 1,700 bonds vs. BND which covers over 8,200. VCIT has about $17 Billion in assets, which is much smaller than BND. Most of VCIT bonds are rated BBB or A. It has literally 0 bonds which are rated BB or below. BND also has virtually no bonds rated BB or below. VCIT expense ratio is 0.05%, the same as BND expense ratio. Performance wise, VCIT fared better than BND. In the last 5 years, VCIT returned 4.21% vs. BND 2.12%. But VCIT is also more tax inefficient. VCIT tax-cost ratio is 1.39% vs. BND 1.06%. And VCIT is also more volatile than BND: its Beta is 1.4 over the last 5 years (40% more volatile than S&P 500!). How do you think? Which one will you choose?
With corporate spreads near their lows, neither. The only rational bond exposure for now is shortest term US Treasuries.
BND gives you a broader exposure to US bonds, while VCIT focuses on corporate bonds. Both products include high-grade securities. VCIT has higher historical returns, but it’s also more volatile, and less tax efficient.