The Vanguard Total Bond Market Index Fund ETF Shares (BND) and the Vanguard Small-Cap Value Index Fund ETF Shares (VBR) are both among the Top 100 ETFs. BND is a Vanguard Intermediate-Term Bond fund and VBR is a Vanguard Small Value fund. So, what’s the difference between BND and VBR? And which fund is better?
The expense ratio of BND is 0.04 percentage points lower than VBR’s (0.03% vs. 0.07%). BND is mostly comprised of AAA bonds while VBR has a high exposure to the financial services sector. Overall, BND has provided lower returns than VBR over the past ten years.
In this article, we’ll compare BND vs. VBR. We’ll look at portfolio growth and performance, as well as at their fund composition and industry exposure. Moreover, I’ll also discuss BND’s and VBR’s holdings, risk metrics, and annual returns and examine how these affect their overall returns.
Summary
| BND | VBR | |
| Name | Vanguard Total Bond Market Index Fund ETF Shares | Vanguard Small-Cap Value Index Fund ETF Shares |
| Category | Intermediate-Term Bond | Small Value |
| Issuer | Vanguard | Vanguard |
| AUM | 312.15B | 48.08B |
| Avg. Return | 4.09% | 12.28% |
| Div. Yield | 2.02% | 1.6% |
| Expense Ratio | 0.03% | 0.07% |
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 Vanguard Small-Cap Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.
BND’s dividend yield is 0.42% higher than that of VBR (2.02% vs. 1.6%). Also, BND yielded on average 8.19% less per year over the past decade (4.09% vs. 12.28%). The expense ratio of BND is 0.04 percentage points lower than VBR’s (0.03% vs. 0.07%).
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.
| VBR Holdings | Weight |
| Diamondback Energy Inc | 0.55% |
| VICI Properties Inc Ordinary Shares | 0.54% |
| IDEX Corp | 0.54% |
| Nuance Communications Inc | 0.5% |
| Molina Healthcare Inc | 0.48% |
| Signature Bank | 0.46% |
| Novavax Inc | 0.44% |
| Howmet Aerospace Inc | 0.44% |
| Apollo Global Management Inc Class A | 0.42% |
| Brown & Brown Inc | 0.41% |
VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.
Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.
Risk Analysis
| BND | VBR | |
| Mean Return | 0.28 | 1.08 |
| R-squared | 99.34 | 82.2 |
| Std. Deviation | 3.14 | 18.37 |
| Alpha | -0.14 | -5.09 |
| Beta | 1.04 | 1.23 |
| Sharpe Ratio | 0.88 | 0.67 |
| Treynor Ratio | 2.64 | 9.15 |
The Vanguard Total Bond Market Index Fund ETF Shares (BND) has a Alpha of -0.14 with a Beta of 1.04 and a Mean Return of 0.28. Its R-squared is 99.34 while BND’s Sharpe Ratio is 0.88. Furthermore, the fund has a Standard Deviation of 3.14 and a Treynor Ratio of 2.64.
The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Sharpe Ratio of 0.67 with a Standard Deviation of 18.37 and a Treynor Ratio of 9.15. Its Beta is 1.23 while VBR’s Alpha is -5.09. Furthermore, the fund has a R-squared of 82.2 and a Mean Return of 1.08.
BND’s Mean Return is 0.80 points lower than that of VBR and its R-squared is 17.14 points higher. With a Standard Deviation of 3.14, BND is slightly less volatile than VBR. The Alpha and Beta of BND are 4.95 points higher and 0.19 points lower than VBR’s Alpha and Beta.
Performance
Annual Returns
| Year | BND | VBR |
| 2020 | 7.71% | 5.82% |
| 2019 | 8.71% | 22.76% |
| 2018 | -0.04% | -12.22% |
| 2017 | 3.62% | 11.79% |
| 2016 | 2.57% | 24.8% |
| 2015 | 0.39% | -4.67% |
| 2014 | 5.96% | 10.55% |
| 2013 | -2.14% | 36.57% |
| 2012 | 4.04% | 18.78% |
| 2011 | 7.71% | -4.05% |
| 2010 | 6.51% | 24.97% |
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 VBR, returning 36.57% on an annual basis. The poorest year for VBR in the last ten years was 2018, with a yield of -12.22%. Most years the Vanguard Small-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2017, and 2012, when gains were 10.55%, 11.79%, and 18.78% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| BND | $10,000 | $15,456 | 4.09% |
| VBR | $10,000 | $32,611 | 12.28% |
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 VBR, the end total would have been $32,611. This equates to a $22,611 profit over 11 years and a compound annual growth rate (CAGR) of 12.28%.
BND’s CAGR is 8.19 percentage points lower than that of VBR and as a result, would have yielded $17,155 less on a $10,000 investment. Thus, BND performed worse than VBR by 8.19% annually.
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