BNDW vs BNDX: Which is the Better Investment Option?
LAST UPDATED: July 17, 2023 | By Conrad Golly
Are you looking to invest in a global bond fund but unsure whether to choose BNDW or BNDX? Both of these Vanguard funds are popular among investors, but they have some key differences that could impact your investment strategy. BNDW vs BNDX:
One of the main differences between BNDW and BNDX is their exposure to U.S. bonds. BNDW includes U.S. bonds while BNDX does not. This means that BNDW may be a better choice if you want to have exposure to both U.S. and non-U.S. bonds in your portfolio.
However, if you’re looking to diversify away from U.S. bonds, BNDX may be the better choice for you.
BNDW vs BNDX – Overview
An important factor to consider when comparing these two funds is their expense ratio. BNDW has a lower expense ratio of 0.06% compared to BNDX’s expense ratio of 0.08%. While this may seem like a small difference, it can add up over time and impact your overall returns. It’s important to consider the expense ratio of any fund you invest in, as it can eat away at your returns over time.
When it comes to investing in bonds, choosing the right investment vehicle is crucial. Two popular options are BNDW and BNDX, both offered by Vanguard. In this section, we will provide an overview of BNDW vs BNDX and help you understand the key differences between these two investment options.
What’s The Difference?
The main difference between BNDW and BNDX is that BNDW includes U.S. bonds while BNDX does not. This means that BNDW provides investors with exposure to both domestic and international bonds, while BNDX only provides exposure to international bonds. Another difference is their expense ratio: BNDW has an expense ratio of 0.06%, which is 0.02% less than BNDX.
BNDW vs BNDX – Fund Composition
BNDW and BNDX are both exchange-traded funds (ETFs) that invest in a diversified portfolio of bonds. BNDW invests in both domestic and international bonds, while BNDX only invests in international bonds. BNDW holds significantly more securities than BNDX, with over 11,000 bonds in its portfolio compared to BNDX’s 5,000 bonds.
Credit Quality
Both BNDW and BNDX invest in high-quality bonds, with an average credit rating of A for BNDW and A- for BNDX. This means that both funds invest in bonds that are considered to have a low credit risk.
Regional Allocation
BNDW has a more diversified regional allocation than BNDX. BNDW has exposure to five regions: North America, Europe, Pacific, Emerging Markets, and Middle East. In contrast, BNDX only has exposure to three regions: Europe, Pacific, and Emerging Markets.
Maturity
BNDW has a longer average maturity than BNDX, with an average maturity of 8.7 years compared to BNDX’s 7.6 years. This means that BNDW is more sensitive to changes in interest rates than BNDX.
In summary, BNDW and BNDX are both excellent options for investors looking to invest in bonds. BNDW provides exposure to both domestic and international bonds, while BNDX only provides exposure to international bonds. BNDW has a more diversified regional allocation and holds significantly more securities than BNDX. However, BNDX has a lower expense ratio and a shorter average maturity. Ultimately, the choice between BNDW and BNDX will depend on your investment goals and risk tolerance.
BNDW vs BNDX – Analysis
When it comes to investing in global bond funds, BNDW and BNDX are two popular options offered by Vanguard. Both funds have their own unique characteristics, and it can be difficult to decide which one is right for you. In this section, we’ll take a closer look at BNDW vs BNDX, analyzing their volatility and drawdowns.
Volatility
One of the key differences between BNDW and BNDX is their volatility. BNDW includes U.S. bonds, while BNDX does not. As a result, BNDX is generally less volatile than BNDW. This can make it a good choice for investors who are looking for a more stable investment option.
Drawdown
Another important factor to consider when comparing BNDW vs BNDX is their drawdowns. Drawdowns refer to the peak-to-trough decline in the value of an investment during a specific period. BNDW has historically experienced higher drawdowns than BNDX. This means that BNDW can be riskier than BNDX, and investors may experience greater losses during market downturns.
To better understand the drawdowns of BNDW vs BNDX, let’s take a look at a comparison table of their risk-adjusted performance metrics and Sharpe ratio:
| Fund | Risk-Adjusted Performance | Sharpe Ratio |
|---|---|---|
| BNDW | 0.57 | 1.82 |
| BNDX | 0.54 | 1.71 |
As you can see, BNDW has a slightly higher risk-adjusted performance and Sharpe ratio than BNDX. However, this comes at the cost of higher drawdowns and greater risk.
Low Fees
Both BNDW and BNDX have low fees, making them attractive options for investors who are looking to minimize their investment costs. BNDW has an expense ratio of 0.06%, while BNDX charges 0.07%. This means that BNDW is slightly cheaper than BNDX, which can make it a better choice for investors who are looking to save on fees.
Vanguard Total Bond
It’s worth noting that both BNDW and BNDX are part of the Vanguard Total Bond Market Index Fund. This means that they are both designed to provide exposure to the entire U.S. investment-grade bond market. However, BNDW includes international bonds, while BNDX does not.
In conclusion, BNDW and BNDX are both excellent options for investors who are looking to invest in global bond funds. However, they have their own unique characteristics that make them better suited for different types of investors. By analyzing their volatility and drawdowns, you can make an informed decision about which fund is right for you.
BNDW vs BNDX – Performance
When it comes to investing in bond funds, two popular options are BNDW and BNDX. Both funds are designed to provide broad exposure to global bond markets, but they differ in their composition and performance. In this section, we will compare the annual returns and portfolio growth of BNDW and BNDX, and discuss how they may impact your investment strategy.
Annual Returns
One of the key factors to consider when comparing BNDW and BNDX is their annualized return. According to PortfoliosLab, over the past 10 years, BNDX has outperformed BNDW with an annualized return of 1.86%, while BNDW has yielded a comparatively lower 0.62% annualized return. However, over the past two years, BNDW has outperformed BNDX with a compound annual growth rate of 8.95% (Mr. Marvin Allen).
It is important to note that past performance is not a guarantee of future results. However, looking at historical returns can provide some insight into how the funds have performed in different market conditions.
Portfolio Growth
Another important factor to consider is portfolio growth. As of May 31, 2023, BNDW had a total net asset value (NAV) of $28.9 billion, while BNDX had a NAV of $22.6 billion (ETF.com). This indicates that BNDW is a larger fund with more assets under management (AUM).
In terms of dividend yield, BNDW and BNDX are both relatively low, with yields of 1.64% and 0.89%, respectively (ETF.com). This may be a consideration for investors who are looking for higher yields from their bond investments.
When it comes to diversification, BNDW holds significantly more securities than BNDX (Mr. Marvin Allen). BNDW invests in more than 7,000 bonds from around the world, while BNDX focuses on non-US developed markets (ETF.com). This may be a consideration for investors who are looking for broad exposure to global bond markets.
Rebalance and Performance Comparison
Passive investors and Bogleheads may find that BNDW and BNDX are good options for their investment strategy. Both funds are indexed mutual funds, which means that they are designed to track the performance of a specific market index. This can be beneficial for investors who want to avoid the fees and potential underperformance of active managers.
One way to enhance performance is to rebalance your portfolio periodically. This involves selling assets that have performed well and buying assets that have underperformed, in order to maintain a desired asset allocation. Rebalancing can help to reduce risk and increase returns over time.
Bottom line: BNDW vs BNDX
When it comes to choosing between BNDW and BNDX, it ultimately depends on your investment goals and preferences. Here are some factors to consider:
Diversification
Both BNDW and BNDX offer a way to diversify your bond portfolio by investing in bonds from around the world. BNDW includes U.S. bonds, while BNDX does not. BNDW also holds significantly more securities than BNDX, which can help to further diversify your portfolio.
Fees
BNDW has a lower expense ratio than BNDX, which can save you money in the long run. However, it’s important to note that both funds have low fees compared to other mutual funds and ETFs.
Value
BNDW and BNDX are both designed to provide investors with broad exposure to the global bond market. However, BNDW offers exposure to both U.S. and international bonds, while BNDX focuses solely on international bonds. Depending on your investment goals, one fund may be more valuable to you than the other.
Jack Bogle
Both BNDW and BNDX are Vanguard funds, which were founded by legendary investor Jack Bogle. Bogle was a strong advocate for low fees and passive investing, which are both key features of these funds.
Buying
You can buy both BNDW and BNDX through a brokerage account. Keep in mind that ETFs like these are traded like stocks, so you’ll need to pay attention to the bid-ask spread and any trading fees that your broker may charge.
In summary, BNDW and BNDX are both solid options for investors looking to diversify their bond portfolios. BNDW offers exposure to both U.S. and international bonds and has a lower expense ratio than BNDX. However, depending on your investment goals and preferences, one fund may be more valuable to you than the other.
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