The Vanguard Total Bond Market Index Fund ETF Shares (BND) and the iShares MSCI USA Min Vol Factor ETF (USMV) are both among the Top 100 ETFs. BND is a Vanguard Intermediate-Term Bond fund and USMV is a iShares Large Blend fund. So, what’s the difference between BND and USMV? And which fund is better?
The expense ratio of BND is 0.12 percentage points lower than USMV’s (0.03% vs. 0.15%). BND is mostly comprised of AAA bonds while USMV has a high exposure to the technology sector. Overall, BND has provided lower returns than USMV over the past ten years.
In this article, we’ll compare BND vs. USMV. We’ll look at performance and risk metrics, as well as at their fund composition and holdings. Moreover, I’ll also discuss BND’s and USMV’s industry exposure, portfolio growth, and annual returns and examine how these affect their overall returns.
|Name||Vanguard Total Bond Market Index Fund ETF Shares||iShares MSCI USA Min Vol Factor ETF|
|Category||Intermediate-Term Bond||Large Blend|
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 MSCI USA Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.
BND’s dividend yield is 0.52% higher than that of USMV (2.02% vs. 1.5%). Also, BND yielded on average 9.80% less per year over the past decade (4.09% vs. 13.89%). The expense ratio of BND is 0.12 percentage points lower than USMV’s (0.03% vs. 0.15%).
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|BND Bond Sectors||Weight|
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.
|Eli Lilly and Co||1.64%|
|T-Mobile US Inc||1.51%|
|Accenture PLC Class A||1.51%|
|Visa Inc Class A||1.49%|
|Waste Management Inc||1.45%|
|The Kroger Co||1.44%|
|Johnson & Johnson||1.42%|
|Gilead Sciences Inc||1.42%|
USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.
Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.
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The Vanguard Total Bond Market Index Fund ETF Shares (BND) has a Beta of 1.04 with a Treynor Ratio of 2.64 and a Sharpe Ratio of 0.88. Its Standard Deviation is 3.14 while BND’s Alpha is -0.14. Furthermore, the fund has a R-squared of 99.34 and a Mean Return of 0.28.
The iShares MSCI USA Min Vol Factor ETF (USMV) has a Treynor Ratio of 0 with a Mean Return of 0 and a Standard Deviation of 0. Its Alpha is 0 while USMV’s Sharpe Ratio is 0. Furthermore, the fund has a Beta of 0 and a R-squared of 0.
BND’s Mean Return is 0.28 points higher than that of USMV and its R-squared is 99.34 points higher. With a Standard Deviation of 3.14, BND is slightly more volatile than USMV. The Alpha and Beta of BND are 0.14 points lower and 1.04 points higher than USMV’s Alpha and Beta.
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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 USMV, returning 27.77% on an annual basis. The poorest year for USMV in the last ten years was 2011, with a yield of 0.0%. Most years the iShares MSCI USA Min Vol Factor ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 5.6%, 10.5%, and 11.04% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in BND would have resulted in a final balance of $12,949. This is a profit of $2,949 over 8 years and amounts to a compound annual growth rate (CAGR) of 4.09%.
With a $10,000 investment in USMV, the end total would have been $27,607. This equates to a $17,607 profit over 8 years and a compound annual growth rate (CAGR) of 13.89%.
BND’s CAGR is 9.80 percentage points lower than that of USMV and as a result, would have yielded $14,658 less on a $10,000 investment. Thus, BND performed worse than USMV by 9.80% annually.
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