It is a passive ETF managed by Vanguard that tracks the Bloomberg US 5-10 Year Corporate Bond Index. It automatically provides diversified, market-cap-weighted exposure to US investment-grade corporate bonds with maturities of 5-10 years.

It suits asset allocation investors who want intermediate-duration exposure to investment-grade corporate bonds, as well as core bond investors seeking higher yields than Treasury ETFs.

It is an ETF run with a passive (index-tracking) management approach by Vanguard.

It uses a passive strategy that holds US investment-grade corporate bonds with 5-10 year maturities on a market-cap-weighted basis. It earns an additional credit spread over Treasuries, but because of its intermediate duration it is structurally exposed to interest rate movements to a certain degree.

• Broad diversification across US 5-10 year corporate bonds
• Ultra-low-fee corporate bond core holding
• Monthly distributions for stable cash flow

Assets under management (AUM) stand at $67.8B, and the expense ratio is 0.03% per year.

IGIB and SCHI, shown in the table, are direct substitutes that track the same 5-10 year investment-grade corporate bonds, with the sponsor and expense ratio being the main differences. SPIB is a variant tracking broad intermediate-term corporate bonds, IGLB is a variant tracking long-term corporate bonds, and FIIG is an actively managed variant.

Bond prices declined during periods of rising interest rates and recovered when rates were held steady or cut. Short-term volatility also widened somewhat during periods of credit spread widening.

It belongs to the group of mega corporate bond ETFs that steadily attract bond asset allocation money seeking higher yields than Treasury ETFs. Inflows can be particularly noticeable when credit spreads are tightening.

Its main strengths are an ultra-low expense ratio and broad diversification across US 5-10 year corporate bonds, while price declines when rates rise and exposure to credit risk should be considered in advance.

IGIB and SCHI, shown in the table, are direct substitutes tracking 5-10 year corporate bonds, SPIB is a variant tracking broad intermediate-term corporate bonds, IGLB tracks long-term corporate bonds, and FIIG is an actively managed variant. You can also consider additional variants such as VCSH for short-term corporate bonds, VCLT for long-term corporate bonds, BND and AGG for aggregate bonds, and HYG for high-yield bonds.

Here are the points to review before investing in VCIT. Broad diversification across US 5-10 year corporate bonds is its strength, but it is advisable to double-check interest rate risk, credit risk and currency effects before buying, and to review duration and asset allocation weighting at the same time.

Rising interest rates, credit risk and exchange rate fluctuations are the main drivers of short-term volatility and real returns. During a strong rate-hiking cycle or an economic downturn, even a corporate bond ETF can suffer short-term losses, so duration and credit exposure should be reviewed together.

It is regarded as a standard choice for a core holding with broad diversification across US 5-10 year corporate bonds. If you need shorter duration, VCSH is a suitable variant; for long-term exposure, VCLT; for aggregate bond diversification, BND and AGG; and if you want high-yield income, HYG.