# VCIT



## lyl (Apr 1, 2017)

Hi - trying to find a good US corporate bond ETF for my portfolio, just wondering what opinion you may have of VCIT? Seems like it holds mid term corporate bonds in the US that are at A rating or slightly below. It has been paying out around .23 cents per share lately and what confuses me is the chart looks like an equity, it is rising while interest rates are rising. I thought bonds were always opposite of interest rates?


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## gibor365 (Apr 1, 2011)

I hold it .... also hold VCSH (short term)... All bonds are investment grade and yielding more than Canadian ones. I also like that they are in USD, as I'm bearish on CDN$


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## lyl (Apr 1, 2017)

Thanks for the reply, may I ask where you hold these ETF's, would they be in your RRSP? I am not sure if they are subject to a withholding tax if in a TFSA or non registered account.


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## jargey3000 (Jan 25, 2011)

gibor365 said:


> I hold it .... also hold VCSH (short term)... All bonds are investment grade and yielding more than Canadian ones. I also like that they are in USD, as I'm bearish on CDN$


gibor - I have some BSV in a non-reg acct. Would VCSH be a better option? do you have any comments on the pros & cons of either? tks.


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## gibor365 (Apr 1, 2011)

lyl said:


> Thanks for the reply, may I ask where you hold these ETF's, would they be in your RRSP? I am not sure if they are subject to a withholding tax if in a TFSA or non registered account.


In RRSP


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## gibor365 (Apr 1, 2011)

jargey3000 said:


> gibor - I have some BSV in a non-reg acct. Would VCSH be a better option? do you have any comments on the pros & cons of either? tks.


VCSH has much higher yield, BSV less risky as about 60% are government bonds and about 12% Baa . VCSH is corporate bonds and 43% Baa.


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## jargey3000 (Jan 25, 2011)

gibor365 said:


> VCSH has much higher yield, BSV less risky as about 60% are government bonds and about 12% Baa . VCSH is corporate bonds and 43% Baa.


thanks. do you sleep nights, holding VCSH ?:ghost:


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## gibor365 (Apr 1, 2011)

jargey3000 said:


> thanks. do you sleep nights, holding VCSH ?:ghost:


Obviously! I'm more confident to hold US investment grade bonds than Ontario or Canadian government bonds


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## twa2w (Mar 5, 2016)

lyl said:


> ........It has been paying out around .23 cents per share lately and what confuses me is the chart looks like an equity, it is rising while interest rates are rising. I thought bonds were always opposite of interest rates?


Triple a rated gov bonds will react more directly to interest rates with the magnitude of change depending on their maturity etc.
Corporate bonds may not have the same reation to interest rates as they may also be affected by propects for the economy ( or sector) and how that affects the underlying company. So an improving economy and improving profits/ sales for the company will influence the price of the bonds.( even if the bonds rating stays the same). Of course the magnitude of this effect is less for A rated bonds than junk bonds. Even news releases by companyies stating they are buying back shares, or calling certain series of bonds can cause the company's other bonds to move in price.


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## lyl (Apr 1, 2017)

Thanks for the reply twa2w, so would you feel comfortable with holding corporate bonds instead of government as your bond portion of the portfolio which is to reduce volatility from your equities?


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## off.by.10 (Mar 16, 2014)

twa2w said:


> Triple a rated gov bonds will react more directly to interest rates with the magnitude of change depending on their maturity etc.
> Corporate bonds may not have the same reation to interest rates as they may also be affected by propects for the economy ( or sector) and how that affects the underlying company. So an improving economy and improving profits/ sales for the company will influence the price of the bonds.( even if the bonds rating stays the same). Of course the magnitude of this effect is less for A rated bonds than junk bonds. Even news releases by companyies stating they are buying back shares, or calling certain series of bonds can cause the company's other bonds to move in price.


I am having similar worries looking at the charts. I was thinking of buying some VCIT to diversify away from canadian bonds and for the low MER. But seeing as it went up nearly 20% over the last 5 years (more than the yield), I have to wonder how much use it will be if things start going more poorly. I don't see why it could not swing 20% the other way. And in that case, would it be much more use than simply holding equity? Or is there something I'm missing about the structure of this ETF?


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## zylon (Oct 27, 2010)

I've spent a few hours looking through various USD bond ETFs; there are far too many to choose from.

PIMCO has some bond funds with outstanding past performance, but fees are high, and price is volatile.

This chart shows iShares LQD and four Vanguard funds.



Fact sheet for LQD (mer 0.15%)
https://www.ishares.com/us/products/239566/ishares-iboxx-investment-grade-corporate-bond-etf

I went with VCSH for the lower volatility and hopefully, lower risk.

Fund overview comparison of the four Vanguard funds.
https://personal.vanguard.com/us/funds/vanguard/compare?navigatingFrom=4
- not sure if this link will work.


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## ontario99 (Apr 13, 2016)

I have 50% VCIT and 50% BND in my bond allocation in my IRA (a US version of RRSP). I was looking for an intermediate bond that had a better yield than government bonds after reading some article by Jack Bogle recommending to move 1/3 of bonds to corporate bonds from government bonds... So far I've been very happy with this move.


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## lonewolf :) (Sep 13, 2016)

gibor365 said:


> VCSH has much higher yield, BSV less risky as about 60% are government bonds and about 12% Baa . VCSH is corporate bonds and 43% Baa.


Government bonds have no assets backing them. Government bonds are more risky then corporate.


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## gibor365 (Apr 1, 2011)

lonewolf :) said:


> Government bonds have no assets backing them. Government bonds are more risky then corporate.


That's what I said earlier 


> I'm more confident to hold US investment grade bonds than Ontario or Canadian government bonds


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## james4beach (Nov 15, 2012)

Government bonds have the cashflow from all residential and corporate taxpayers backing them, plus the money printing ability of the central bank. It takes a lot to default on government bonds.


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