Vanguard's VCIT Delivers More Income Than VGIT. Is the Credit Risk Worth It?

Core Insights - The Vanguard Intermediate-Term Corporate Bond ETF (VCIT) offers higher yields and takes on more credit risk compared to the Vanguard Intermediate-Term Treasury ETF (VGIT), which focuses solely on U.S. Treasuries and has shown less historical drawdown [1][2]. Cost and Size - Both VCIT and VGIT have an expense ratio of 0.03% and are among the most affordable bond ETFs available [3][4]. - As of January 30, 2026, VCIT has a 1-year return of 8.8% and a dividend yield of 4.6%, while VGIT has a 1-year return of 6.6% and a dividend yield of 3.8% [3][4]. Performance and Risk Comparison - Over the past five years, VGIT experienced a maximum drawdown of 15.04%, while VCIT had a higher maximum drawdown of 20.56% [5]. - The growth of a $1,000 investment over five years is $867 for VGIT and $872 for VCIT, indicating similar performance despite the different risk profiles [5]. Portfolio Composition - VCIT invests in a diverse range of high-quality, investment-grade corporate bonds, with significant holdings in companies like Meta Platforms, U.S. Treasury securities, and Bank of America [6]. - VGIT exclusively holds U.S. Treasury securities, providing a straightforward investment option with minimal credit risk [7]. Implications for Investors - Both funds target intermediate-term bonds maturing in 5-10 years, but VCIT invests in corporate debt from blue-chip companies, while VGIT lends directly to the federal government through Treasury bonds [8].