The Vanguard Total Bond Market Index Fund ETF Shares (BND) and the Vanguard Real Estate Index Fund ETF Shares (VNQ) are both among the Top 100 ETFs. BND is a Vanguard Intermediate-Term Bond fund and VNQ is a Vanguard Real Estate fund. So, what’s the difference between BND and VNQ? And which fund is better?
The expense ratio of BND is 0.09 percentage points lower than VNQ’s (0.03% vs. 0.12%). BND is mostly comprised of AAA bonds while VNQ has a high exposure to the real estate sector. Overall, BND has provided lower returns than VNQ over the past ten years.
In this article, we’ll compare BND vs. VNQ. We’ll look at portfolio growth and risk metrics, as well as at their performance and annual returns. Moreover, I’ll also discuss BND’s and VNQ’s fund composition, holdings, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard Total Bond Market Index Fund ETF Shares||Vanguard Real Estate Index Fund ETF Shares|
|Category||Intermediate-Term Bond||Real Estate|
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 Real Estate Index Fund ETF Shares (VNQ) is a Real Estate fund that is issued by Vanguard. It currently has 77.34B total assets under management and has yielded an average annual return of 11.05% over the past 10 years. The fund has a dividend yield of 2.34% with an expense ratio of 0.12%.
BND’s dividend yield is 0.32% lower than that of VNQ (2.02% vs. 2.34%). Also, BND yielded on average 6.95% less per year over the past decade (4.09% vs. 11.05%). The expense ratio of BND is 0.09 percentage points lower than VNQ’s (0.03% vs. 0.12%).
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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.
|Vanguard Real Estate II Index||11.62%|
|American Tower Corp||7.24%|
|Crown Castle International Corp||5.01%|
|Simon Property Group Inc||2.52%|
|Digital Realty Trust Inc||2.49%|
|SBA Communications Corp||2.1%|
VNQ’s Top Holdings are Vanguard Real Estate II Index, American Tower Corp, Prologis Inc, Crown Castle International Corp, and Equinix Inc at 11.62%, 7.24%, 5.33%, 5.01%, and 4.3%.
Public Storage (2.85%), Simon Property Group Inc (2.52%), and Digital Realty Trust Inc (2.49%) have a slightly smaller but still significant weight. SBA Communications Corp and Welltower Inc are also represented in the VNQ’s holdings at 2.1% and 2.09%.
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The Vanguard Total Bond Market Index Fund ETF Shares (BND) has a Alpha of -0.14 with a Standard Deviation of 3.14 and a Sharpe Ratio of 0.88. Its Mean Return is 0.28 while BND’s R-squared is 99.34. Furthermore, the fund has a Beta of 1.04 and a Treynor Ratio of 2.64.
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Alpha of 2.47 with a Standard Deviation of 16.13 and a Beta of 0.76. Its Sharpe Ratio is 0.62 while VNQ’s R-squared is 44.4. Furthermore, the fund has a Mean Return of 0.89 and a Treynor Ratio of 11.9.
BND’s Mean Return is 0.61 points lower than that of VNQ and its R-squared is 54.94 points higher. With a Standard Deviation of 3.14, BND is slightly less volatile than VNQ. The Alpha and Beta of BND are 2.61 points lower and 0.28 points higher than VNQ’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 2014 was the strongest year for VNQ, returning 30.29% on an annual basis. The poorest year for VNQ in the last ten years was 2018, with a yield of -5.95%. Most years the Vanguard Real Estate Index Fund ETF Shares has given investors modest returns, such as in 2017, 2016, and 2011, when gains were 4.95%, 8.53%, and 8.62% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 VNQ, the end total would have been $29,506. This equates to a $19,506 profit over 11 years and a compound annual growth rate (CAGR) of 11.05%.
BND’s CAGR is 6.95 percentage points lower than that of VNQ and as a result, would have yielded $14,050 less on a $10,000 investment. Thus, BND performed worse than VNQ by 6.95% annually.
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