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BND vs. IGSB: What’s The Difference?

The Vanguard Total Bond Market Index Fund ETF Shares (BND) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. BND is a Vanguard Intermediate-Term Bond fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between BND and IGSB? And which fund is better?

The expense ratio of BND is 0.03 percentage points lower than IGSB’s (0.03% vs. 0.06%). BND is mostly comprised of AAA bonds and IGSB has a high exposure to BBB bond. Overall, BND has provided higher returns than IGSB over the past ten years.

In this article, we’ll compare BND vs. IGSB. We’ll look at risk metrics and performance, as well as at their fund composition and holdings. Moreover, I’ll also discuss BND’s and IGSB’s portfolio growth, industry exposure, and annual returns and examine how these affect their overall returns.

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Summary

BNDIGSB
NameVanguard Total Bond Market Index Fund ETF SharesiShares 1-5 Year Investment Grade Corporate Bond ETF
CategoryIntermediate-Term BondShort-Term Bond
IssuerVanguardiShares
AUM312.15B26.63B
Avg. Return4.09%2.51%
Div. Yield2.02%2.02%
Expense Ratio0.03%0.06%

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 iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.

BND’s dividend yield is 0.00% lower than that of IGSB (2.02% vs. 2.02%). Also, BND yielded on average 1.59% more per year over the past decade (4.09% vs. 2.51%). The expense ratio of BND is 0.03 percentage points lower than IGSB’s (0.03% vs. 0.06%).

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Fund Composition

Holdings

BND - Holdings

BND Bond SectorsWeight
AAA68.72%
BBB16.17%
A11.87%
AA3.34%
Below B0.01%
B0.0%
BB0.0%
US Government0.0%
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.

IGSB - Holdings

IGSB Bond SectorsWeight
BBB50.48%
A40.04%
AA7.46%
AAA2.21%
BB0.09%
Below B0.0%
B0.0%
US Government0.0%
Others-0.28%

IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.

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Risk Analysis

BNDIGSB
Mean Return0.280.19
R-squared99.3426.13
Std. Deviation3.142
Alpha-0.140.69
Beta1.040.34
Sharpe Ratio0.880.82
Treynor Ratio2.644.82

The Vanguard Total Bond Market Index Fund ETF Shares (BND) has a Sharpe Ratio of 0.88 with a Standard Deviation of 3.14 and a R-squared of 99.34. Its Beta is 1.04 while BND’s Treynor Ratio is 2.64. Furthermore, the fund has a Mean Return of 0.28 and a Alpha of -0.14.

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a R-squared of 26.13 with a Sharpe Ratio of 0.82 and a Treynor Ratio of 4.82. Its Mean Return is 0.19 while IGSB’s Alpha is 0.69. Furthermore, the fund has a Beta of 0.34 and a Standard Deviation of 2.

BND’s Mean Return is 0.09 points higher than that of IGSB and its R-squared is 73.21 points higher. With a Standard Deviation of 3.14, BND is slightly more volatile than IGSB. The Alpha and Beta of BND are 0.83 points lower and 0.70 points higher than IGSB’s Alpha and Beta.

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Performance

Annual Returns

BND vs. IGSB - Annual Returns

YearBNDIGSB
20207.71%5.26%
20198.71%7.01%
2018-0.04%1.34%
20173.62%1.41%
20162.57%1.77%
20150.39%0.7%
20145.96%0.74%
2013-2.14%1.03%
20124.04%3.28%
20117.71%1.34%
20106.51%3.69%

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 2019 was the strongest year for IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% respectively.

Portfolio Growth

BND vs. IGSB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
BND$10,000$15,4564.09%
IGSB$10,000$13,1032.51%

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 IGSB, the end total would have been $13,103. This equates to a $3,103 profit over 11 years and a compound annual growth rate (CAGR) of 2.51%.

BND’s CAGR is 1.59 percentage points higher than that of IGSB and as a result, would have yielded $2,353 more on a $10,000 investment. Thus, BND outperformed IGSB by 1.59% annually.


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