The Vanguard Total Bond Market Index Fund ETF Shares (BND) and the Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) are both among the Top 100 ETFs. BND is a Vanguard Intermediate-Term Bond fund and VIG is a Vanguard Large Blend fund. So, what’s the difference between BND and VIG? And which fund is better?
The expense ratio of BND is 0.03 percentage points lower than VIG’s (0.03% vs. 0.06%). BND is mostly comprised of AAA bonds while VIG has a high exposure to the industrials sector. Overall, BND has provided lower returns than VIG over the past ten years.
In this article, we’ll compare BND vs. VIG. We’ll look at industry exposure and portfolio growth, as well as at their holdings and annual returns. Moreover, I’ll also discuss BND’s and VIG’s performance, fund composition, and risk metrics and examine how these affect their overall returns.
Summary
| BND | VIG | |
| NameVanguard Total Bond Market Index Fund ETF SharesVanguard Dividend Appreciation Index Fund ETF Shares | ||
| Category | Intermediate-Term Bond | Large Blend |
| Issuer | Vanguard | Vanguard |
| AUM | 312.15B | 71.92B |
| Avg. Return | 4.09% | 13.35% |
| Div. Yield | 2.02% | 1.56% |
| Expense Ratio | 0.03% | 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 Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) is a Large Blend fund that is issued by Vanguard. It currently has 71.92B total assets under management and has yielded an average annual return of 13.35% over the past 10 years. The fund has a dividend yield of 1.56% with an expense ratio of 0.06%.
BND’s dividend yield is 0.46% higher than that of VIG (2.02% vs. 1.56%). Also, BND yielded on average 9.25% less per year over the past decade (4.09% vs. 13.35%). The expense ratio of BND is 0.03 percentage points lower than VIG’s (0.03% vs. 0.06%).
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.
| VIG Holdings | Weight |
| Microsoft Corp | 4.19% |
| JPMorgan Chase & Co | 3.8% |
| Johnson & Johnson | 3.67% |
| Walmart Inc | 3.38% |
| Visa Inc Class A | 3.22% |
| UnitedHealth Group Inc | 3.22% |
| The Home Depot Inc | 2.91% |
| Procter & Gamble Co | 2.82% |
| Comcast Corp Class A | 2.21% |
| Coca-Cola Co | 1.98% |
VIG’s Top Holdings are Microsoft Corp, JPMorgan Chase & Co, Johnson & Johnson, Walmart Inc, and Visa Inc Class A at 4.19%, 3.8%, 3.67%, 3.38%, and 3.22%.
UnitedHealth Group Inc (3.22%), The Home Depot Inc (2.91%), and Procter & Gamble Co (2.82%) have a slightly smaller but still significant weight. Comcast Corp Class A and Coca-Cola Co are also represented in the VIG’s holdings at 2.21% and 1.98%.
Risk Analysis
| BND | VIG | |
| Mean Return | 0.28 | 1.09 |
| R-squared | 99.34 | 92.2 |
| Std. Deviation | 3.14 | 12.25 |
| Alpha | -0.14 | 0.12 |
| Beta | 1.04 | 0.86 |
| Sharpe Ratio | 0.88 | 1.01 |
| Treynor Ratio | 2.64 | 14.33 |
The Vanguard Total Bond Market Index Fund ETF Shares (BND) has a Beta of 1.04 with a Sharpe Ratio of 0.88 and a Alpha of -0.14. Its R-squared is 99.34 while BND’s Mean Return is 0.28. Furthermore, the fund has a Treynor Ratio of 2.64 and a Standard Deviation of 3.14.
The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a R-squared of 92.2 with a Standard Deviation of 12.25 and a Mean Return of 1.09. Its Treynor Ratio is 14.33 while VIG’s Beta is 0.86. Furthermore, the fund has a Alpha of 0.12 and a Sharpe Ratio of 1.01.
BND’s Mean Return is 0.81 points lower than that of VIG and its R-squared is 7.14 points higher. With a Standard Deviation of 3.14, BND is slightly less volatile than VIG. The Alpha and Beta of BND are 0.26 points lower and 0.18 points higher than VIG’s Alpha and Beta.
Performance
Annual Returns
| Year | BND | VIG |
| 2020 | 7.71% | 15.46% |
| 2019 | 8.71% | 29.71% |
| 2018 | -0.04% | -2.02% |
| 2017 | 3.62% | 22.22% |
| 2016 | 2.57% | 11.84% |
| 2015 | 0.39% | -1.95% |
| 2014 | 5.96% | 10.06% |
| 2013 | -2.14% | 28.99% |
| 2012 | 4.04% | 11.61% |
| 2011 | 7.71% | 6.21% |
| 2010 | 6.51% | 14.67% |
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 2019 was the strongest year for VIG, returning 29.71% on an annual basis. The poorest year for VIG in the last ten years was 2018, with a yield of -2.02%. Most years the Vanguard Dividend Appreciation Index Fund ETF Shares has given investors modest returns, such as in 2012, 2016, and 2010, when gains were 11.61%, 11.84%, and 14.67% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| BND | $10,000 | $15,456 | 4.09% |
| VIG | $10,000 | $37,951 | 13.35% |
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 VIG, the end total would have been $37,951. This equates to a $27,951 profit over 11 years and a compound annual growth rate (CAGR) of 13.35%.
BND’s CAGR is 9.25 percentage points lower than that of VIG and as a result, would have yielded $22,495 less on a $10,000 investment. Thus, BND performed worse than VIG by 9.25% annually.
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