The Vanguard Total Bond Market Index Fund ETF Shares (BND) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. BND is a Vanguard Intermediate-Term Bond fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between BND and DFAC? And which fund is better?
The expense ratio of BND is 0.16 percentage points lower than DFAC’s (0.03% vs. 0.19%). BND is mostly comprised of AAA bonds while DFAC has a high exposure to the technology sector. Overall, BND has provided lower returns than DFAC over the past ten years.
In this article, we’ll compare BND vs. DFAC. We’ll look at annual returns and portfolio growth, as well as at their industry exposure and fund composition. Moreover, I’ll also discuss BND’s and DFAC’s risk metrics, holdings, and performance and examine how these affect their overall returns.
Summary
| BND | DFAC | |
| Name | Vanguard Total Bond Market Index Fund ETF Shares | Dimensional U.S. Core Equity 2 ETF |
| Category | Intermediate-Term Bond | Large Blend |
| Issuer | Vanguard | Dimensional Fund Advisors |
| AUM | 312.15B | 13.53B |
| Avg. Return | 4.09% | 13.93% |
| Div. Yield | 2.02% | 1.0% |
| Expense Ratio | 0.03% | 0.19% |
The Vanguard Total Bond Market Index Fund ETF Shares (BND) is a Intermediate-Term Bond fund that is issued by Vanguard. It currently has 312.15B total assets under management and has yielded an average annual return of 4.09% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.03%.
The Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.
BND’s dividend yield is 1.02% higher than that of DFAC (2.02% vs. 1.0%). Also, BND yielded on average 9.84% less per year over the past decade (4.09% vs. 13.93%). The expense ratio of BND is 0.16 percentage points lower than DFAC’s (0.03% vs. 0.19%).
Fund Composition
Holdings
| BND Bond Sectors | Weight |
| AAA | 68.72% |
| BBB | 16.17% |
| A | 11.87% |
| AA | 3.34% |
| Below B | 0.01% |
| B | 0.0% |
| BB | 0.0% |
| US Government | 0.0% |
| Others | -0.11% |
BND’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Below B at 68.72%, 16.17%, 11.87%, 3.34%, and 0.01%. The fund is less weighted towards B (0.0%), BB (0.0%), and US Government (0.0%) rated bonds.
| DFAC Holdings | Weight |
| Apple Inc | 4.7% |
| Microsoft Corp | 3.81% |
| Amazon.com Inc | 2.39% |
| Johnson & Johnson | 1.05% |
| Facebook Inc Class A | 1.05% |
| JPMorgan Chase & Co | 1.0% |
| Alphabet Inc Class C | 0.85% |
| Alphabet Inc Class A | 0.84% |
| Berkshire Hathaway Inc Class B | 0.75% |
| Visa Inc Class A | 0.74% |
DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.
JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.
Risk Analysis
| BND | DFAC | |
| Mean Return | 0.28 | 1.19 |
| R-squared | 99.34 | 95.1 |
| Std. Deviation | 3.14 | 15.55 |
| Alpha | -0.14 | -2.75 |
| Beta | 1.04 | 1.12 |
| Sharpe Ratio | 0.88 | 0.88 |
| Treynor Ratio | 2.64 | 11.85 |
The Vanguard Total Bond Market Index Fund ETF Shares (BND) has a Sharpe Ratio of 0.88 with a Treynor Ratio of 2.64 and a Standard Deviation of 3.14. Its R-squared is 99.34 while BND’s Mean Return is 0.28. Furthermore, the fund has a Alpha of -0.14 and a Beta of 1.04.
The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Beta of 1.12 with a R-squared of 95.1 and a Standard Deviation of 15.55. Its Treynor Ratio is 11.85 while DFAC’s Sharpe Ratio is 0.88. Furthermore, the fund has a Mean Return of 1.19 and a Alpha of -2.75.
BND’s Mean Return is 0.91 points lower than that of DFAC and its R-squared is 4.24 points higher. With a Standard Deviation of 3.14, BND is slightly less volatile than DFAC. The Alpha and Beta of BND are 2.61 points higher and 0.08 points lower than DFAC’s Alpha and Beta.
Performance
Annual Returns
| Year | BND | DFAC |
| 2020 | 7.71% | 15.8% |
| 2019 | 8.71% | 29.54% |
| 2018 | -0.04% | -9.43% |
| 2017 | 3.62% | 18.82% |
| 2016 | 2.57% | 16.31% |
| 2015 | 0.39% | -2.53% |
| 2014 | 5.96% | 9.56% |
| 2013 | -2.14% | 37.55% |
| 2012 | 4.04% | 17.93% |
| 2011 | 7.71% | -1.96% |
| 2010 | 6.51% | 21.67% |
BND had its best year in 2019 with an annual return of 8.71%. BND’s worst year over the past decade yielded -2.14% and occurred in 2013. In most years the Vanguard Total Bond Market Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2014 where annual returns amounted to 3.62%, 4.04%, and 5.96% respectively.
The year 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| BND | $10,000 | $15,456 | 4.09% |
| DFAC | $10,000 | $38,796 | 13.93% |
A $10,000 investment in BND would have resulted in a final balance of $15,456. This is a profit of $5,456 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.09%.
With a $10,000 investment in DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.
BND’s CAGR is 9.84 percentage points lower than that of DFAC and as a result, would have yielded $23,340 less on a $10,000 investment. Thus, BND performed worse than DFAC by 9.84% annually.
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