The Vanguard Intermediate-Term Corporate Bond ETF (NASDAQ:VCIT) offers a lower-cost approach to fixed income with a higher historical yield, while Fidelity Investment Grade Bond ETF (NYSEMKT:FIGB) focuses on a more curated portfolio of high-quality debt.
Both funds serve as core fixed income components, seeking to provide steady income and capital preservation through investment-grade bonds. While the Vanguard fund targets a specific maturity window of five to 10 years, the Fidelity fund provides a broader exposure to highly rated debt instruments across various U.S. markets.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield as of the close of trading on Aug. 13.
Vanguard Intermediate-Term Corporate Bond ETF is more affordable with an expense ratio of 0.03%. It also provides a higher payout compared to the 4.1% yield offered by Fidelity Investment Grade Bond ETF.
Performance & risk comparison
What’s inside
Fidelity Investment Grade Bond ETF focuses on a broad range of highly rated debt instruments. Its largest positions include U.S. Treasury bonds (46% of the portfolio aggregating all individual holdings), corporate bonds at 24%, and mortgage-backed security pass-throughs at at 16%.
The fund maintains 976 holdings in total. It was launched in 2021. Fidelity Investment Grade Bond ETF has paid $1.75 per share over the trailing 12 months, which on its recent ~$42.42 share price works out to a 4.1% yield.
Vanguard Intermediate-Term Corporate Bond ETF targets investment-grade corporate bonds issued by industrial, utility, and financial companies with maturities of five to 10 years. Its portfolio is highly diversified with 2,279 holdings, where no single position exceeds 0.31% of assets. About 53% of the portfolio is invested in bonds from industrials, 37% financials, and 10% utilities. It was launched in 2009. Vanguard Intermediate-Term Corporate Bond ETF has paid $3.96 per share over the trailing 12 months, which on its recent ~$81.47 share price works out to a 4.9% yield.
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Which looks like the better buy?
Both funds offer the relative safety of fixed-income with income generation that many investors will appreciate. There are key differences, however.
The Vanguard Intermediate-Term Corporate Bond ETF — VCIT — focuses on investment-grade corporate debt across its pool of holdings. Most of the fund is in U.S. corporates, but about 14% of the fund is in non-U.S. corporate bonds, led by the U.K., the eurozone, and Japan. The corporate focus also means that the credit quality distribution is heavily in good, but not top-rated bonds, with 45% of the portfolio in bonds rated single-A and 47% in triple-B rated debt.
The Fidelity fund, FIGB, is more than 91% in U.S. issuers and 70% in triple-A-rated bonds, with about 36% of its holdings in the single-A and triple-B categories.
It’s performance where the two funds differ. In just about every time frame, VCIT exceeds the returns of FIGB. The Vanguard ETF has returned annualized rates of 5.6%, 0.6%, and 2.6% over the past 3-, 5-, and 10-year periods. By comparison, FIGB provided investors with returns of 3.8% over the past three years and a negative 0.3% over the 3-year and 5-year periods, respectively. The Fidelity fund was formed in 2021, so it does not have a 10 year return (it has returned 0.15% since inception.)
The security of investing in bonds should come with reasonable returns. In that prism, the Vanguard fund, VCIT, shows itself to be the better choice.
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Brendan Coffey 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.
Vanguard VCIT vs Fidelity FIGB: Which Bond ETF Is the Better Choice for Investors in 2026? was originally published by The Motley Fool
