Treasury Safety or Higher Yield From Corporate Bonds? VGSH vs. VCSH

Core Viewpoint - The Vanguard Short-Term Treasury ETF (VGSH) and Vanguard Short-Term Corporate Bond ETF (VCSH) differ in their underlying bond types, risk profiles, and yields, with VCSH offering a higher payout and higher risk while both maintain the same low expense ratio [1][4]. Cost & Size - Both VGSH and VCSH have an expense ratio of 0.03% [3][4]. - As of March 25, 2026, VGSH has a 1-year return of 3.78% and a dividend yield of 3.95%, while VCSH has a 1-year return of 4.89% and a dividend yield of 4.34% [3]. - VGSH has an Assets Under Management (AUM) of $32.67 billion, whereas VCSH has an AUM of $48.3 billion [3]. Performance & Risk Comparison - Over the past five years, VGSH experienced a maximum drawdown of -5.72%, while VCSH had a maximum drawdown of -9.46% [5]. - The growth of a $1,000 investment over five years would result in $948 for VGSH and $958 for VCSH [5]. Portfolio Composition - VCSH invests in over 2,500 investment-grade corporate bonds, with significant holdings in U.S. Treasury securities and Bank of America Corp, providing broad exposure to the corporate credit space [6]. - VGSH exclusively holds U.S. Treasury securities, focusing on government credit quality and minimizing corporate credit risk [7][9]. Investor Considerations - Short-term bond funds like VGSH and VCSH are utilized for stability, income, and lower volatility compared to stocks, with the key distinction being the type of bond exposure—U.S. government bonds versus corporate debt [8]. - VGSH typically performs well during market caution due to its minimal credit risk, while VCSH offers higher yields but is more sensitive to business conditions and investor sentiment towards corporate credit [10].