BSV vs BND: Understanding Two Popular Bond ETFs
LAST UPDATED: July 16, 2023 | By Conrad Golly
BND and BSV are two popular bond ETFs offered by Vanguard. While both funds invest in bonds, their maturity and duration differ. BND invests in short, intermediate, and long term bonds, while BSV only invests in short-term bonds.
This difference in maturity and duration can significantly impact the fund’s yield, risk, and performance. Investing with BSV vs BND requires careful consideration of an investor’s goals, interest rate risk, and time horizon. BND may be suitable for investors seeking a diversified portfolio with a mix of short, intermediate, and long-term bonds.
On the other hand, BSV may be ideal for investors seeking a low-risk, short-term investment with a higher yield curve than a savings account. Staying the course and maintaining a long-term investment strategy is crucial for both funds to achieve their objectives. Let’s delve more into details.
Key Takeaways BSV vs BND
- BND and BSV are two popular bond ETFs offered by Vanguard that differ in maturity and duration.
- Investing with BND vs BSV requires careful consideration of an investor’s goals, risk tolerance, and time horizon.
- Staying the course and maintaining a long-term investment strategy is crucial for both funds to achieve their objectives.
Overview BSV vs BND
When it comes to investing in bonds, choosing the right ETF can be a daunting task. Two popular options are the Vanguard Total Bond Market Index Fund ETF Shares (BND) and the Vanguard Short-Term Bond Index Fund ETF Shares (BSV). This section will provide an overview of these two ETFs, including their definitions and performance comparisons.
Definition
BND is an intermediate-term bond fund that seeks to track the performance of the Bloomberg Barclays U.S. Aggregate Float Adjusted Index. This index includes investment-grade bonds from the U.S. Treasury, government agencies, and corporations.
BSV, on the other hand, is a short-term bond fund that seeks to track the performance of the Bloomberg Barclays U.S. 1-5 Year Government/Credit Float Adjusted Index. This index includes investment-grade bonds with maturities of one to five years.
BND and BSV are ETFs, which means they are traded on stock exchanges like individual stocks. This makes them a convenient choice for investors who want to hold a diversified portfolio of bonds without the hassle of buying individual bonds.
Performance Comparison
When it comes to performance, BND and BSV have different risk and return profiles. BSV is less risky than BND because it holds shorter-term bonds, which are less sensitive to interest rate changes. However, this also means that BSV has a lower yield than BND. As of June 13, 2023, BND has a yield of 2.13%, while BSV has a yield of 1.11%.
In terms of returns, BND has outperformed BSV over the long term. According to ETF Database, BND has a five-year annualized return of 3.38%, while BSV has a five-year annualized return of 1.99%.
However, BSV has outperformed BND over the past year, with a return of 0.94% compared to BND’s return of 0.71%. Investors who want to hold bonds for the long term may prefer BND, while those who want to hold bonds for the short term may prefer BSV.
However, it’s important to note that past performance does not guarantee future results, and investors should always research before making any investment decisions.
BND
Investment Strategy
The Vanguard Total Bond Market Index Fund ETF Shares (BND) is an intermediate-term bond fund that seeks to track the performance of the Bloomberg Barclays U.S. Aggregate Float Adjusted Index.
The index includes various U.S. investment-grade bonds, including government, corporate, and securitized. The fund invests in bonds with maturities between one and ten years.
Expense Ratio
BND has a low expense ratio of 0.035%, making it one of the most cost-effective bond ETFs. This means investors can keep more of their returns instead of paying high fees.
Holdings
BND holds over 9,000 bonds, with $1.2 trillion in assets under management. The fund has a weighted average maturity of 8.1 years and a weighted average duration of 6.0 years.
The fund’s top holdings include U.S. Treasuries, mortgage-backed securities, and corporate bonds. As of June 30, 2023, the fund’s dividend yield was 2.1%.
Performance
BND has delivered consistent returns over the years, providing investors with a good mix of income and capital appreciation.
As of June 30, 2023, the fund had a one-year return of 2.5%, a three-year return of 3.0%, and a five-year return of 3.5%. The fund has a credit rating of AA+, indicating a high credit quality.
BSV
Investment Strategy
The Vanguard Short-Term Bond ETF (BSV) is an exchange-traded fund that seeks to track the performance of the Bloomberg Barclays U.S. 1-5 Year Government/Credit Float Adjusted Index. The fund invests primarily in investment-grade bonds with a 1 to 5 years maturity.
BSV’s investment strategy aims to provide investors with low-cost, diversified exposure to the short-term U.S. investment-grade bond market.
Expense Ratio
BSV has an expense ratio of 0.05%, higher than some of its peers but still relatively low compared to other bond ETFs. The expense ratio is the annual fee investors pay to cover the fund’s operating expenses.
It is important to note that BSV’s expense ratio is still significantly lower than the average expense ratio of actively managed bond funds.
Holdings
BSV’s portfolio comprises U.S. Treasury bonds and investment-grade corporate bonds. As of May 31, 2023, the fund held 2,569 bonds with an average maturity of 2.6 years. The top ten holdings of the fund account for approximately 14% of its total assets.
Performance
BSV’s performance has been relatively stable over the past ten years, with an average annual return of 2.18%.
However, it is essential to note that BSV’s performance can be affected by changes in interest rates, credit risk, and other market factors. Investors should consider their investment objectives and risk tolerance before investing in BSV or any other bond ETF.
The fund’s investment strategy, expense ratio, holdings, and performance should be carefully considered before investing.
| Entity | BND | BSV |
|---|---|---|
| Past Performance | BND has a 5-year average return of 4.05% | BSV has a 5-year average return of 2.35% |
| Average Daily Volume | BND has an average daily volume of 3.8 million | BSV has an average daily volume of 1.6 million |
| Chart | BND’s chart shows a steady upward trend over the past 5 years | BSV’s chart shows a relatively stable trend over the past 5 years |
| Investment or Tax Professional | Investors should consult with an investment or tax professional to determine which fund is right for them | Investors should consult with an investment or tax professional to determine which fund is right for them |
Investing with BND vs BSV
Regarding investing in bond ETFs, two popular options are the Vanguard Total Bond Market Index Fund ETF Shares (BND) and the Vanguard Short-Term Bond Index Fund ETF Shares (BSV).
Both funds have pros and cons, and investors should carefully evaluate their investment goals and risk tolerance before deciding.
Investment Decisions BSV vs BND
Investing in BND vs BSV largely depends on an investor’s investment goals and risk tolerance. BND is an intermediate-term bond fund, while BSV is a short-term bond fund.
BND has a longer average maturity and duration, making it more sensitive to interest rate changes. On the other hand, BSV has a shorter average maturity and duration, which means it is less susceptible to interest rate changes.
Accuracy, Completeness, and Timeliness BSV vs BND
When it comes to accuracy, completeness, and timeliness, both BND and BSV are highly regarded.
Both funds are managed by Vanguard, one of the world’s largest and most respected asset management firms. Vanguard has a long history of providing clients with accurate, complete, and timely investment information.
Research Opinions
Research opinions on BND vs BSV are mixed. Some analysts believe that BND is a better option for investors seeking higher yields and more diversification, while others believe that BSV is a better option for investors seeking lower risk and greater stability.
Ultimately, the decision to invest in BND vs BSV should be based on an investor’s individual investment goals and risk tolerance.
Staying the Course BSV vs BND
When it comes to investing, one of the most important things to remember is to stay the course. This means sticking to your investment plan, even when the market is volatile.
In the case of BND vs BSV, it is important to consider your asset allocation rating, tax advice, and REIT investment options when deciding which fund to invest in.
A.A. Rating
Your asset allocation (A.A.) rating is important when choosing between BND and BSV. BND is a total bond market fund comprising short-term, intermediate-term, and long-term bonds. BSV, on the other hand, is a short-term bond fund with bonds that have an average maturity of 2.7 years.
If your A.A. rating leans towards bonds, then BND may be your better choice. However, if you have a more conservative A.A. rating, then BSV may be a better fit.
Tax Advice
Another factor to consider when choosing between BND and BSV is tax advice. BND has a higher yield, meaning it may be subject to higher taxes. BSV has a lower yield, which may make it a better choice for investors looking to minimize their tax liability.
REIT
Real Estate Investment Trusts (REITs) are another important factor when choosing between BND and BSV. BND includes REITs in its portfolio, while BSV does not. If you are interested in investing in REITs, then BND may be your better choice.
The Bottom Line: BSV vs BND
When it comes to choosing between BND vs BSV, it is important to consider your AA rating, tax advice, and REIT investment options.
By staying the course and making an informed decision, you can ensure that your investment portfolio is well-balanced and set up for long-term success.
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