The Vanguard Total Bond Market Index Fund ETF Shares (BND) and the Vanguard Mid-Cap Index Fund ETF Shares (VO) are both among the Top 100 ETFs. BND is a Vanguard Intermediate-Term Bond fund and VO is a Vanguard Mid-Cap Blend fund. So, what’s the difference between BND and VO? And which fund is better?
The expense ratio of BND is 0.01 percentage points lower than VO’s (0.03% vs. 0.04%). BND is mostly comprised of AAA bonds while VO has a high exposure to the technology sector. Overall, BND has provided lower returns than VO over the past ten years.
In this article, we’ll compare BND vs. VO. We’ll look at industry exposure and performance, as well as at their holdings and annual returns. Moreover, I’ll also discuss BND’s and VO’s risk metrics, fund composition, and portfolio growth and examine how these affect their overall returns.
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Summary
| BND | VO | |
| Name | Vanguard Total Bond Market Index Fund ETF Shares | Vanguard Mid-Cap Index Fund ETF Shares |
| Category | Intermediate-Term Bond | Mid-Cap Blend |
| Issuer | Vanguard | Vanguard |
| AUM | 312.15B | 154.08B |
| Avg. Return | 4.09% | 14.34% |
| Div. Yield | 2.02% | 1.23% |
| Expense Ratio | 0.03% | 0.04% |
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 Mid-Cap Index Fund ETF Shares (VO) is a Mid-Cap Blend fund that is issued by Vanguard. It currently has 154.08B total assets under management and has yielded an average annual return of 14.34% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.04%.
BND’s dividend yield is 0.79% higher than that of VO (2.02% vs. 1.23%). Also, BND yielded on average 10.24% less per year over the past decade (4.09% vs. 14.34%). The expense ratio of BND is 0.01 percentage points lower than VO’s (0.03% vs. 0.04%).
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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.
| VO Holdings | Weight |
| IDEXX Laboratories Inc | 0.78% |
| DocuSign Inc | 0.75% |
| Marvell Technology Inc | 0.68% |
| IQVIA Holdings Inc | 0.68% |
| Chipotle Mexican Grill Inc | 0.63% |
| Veeva Systems Inc Class A | 0.62% |
| Digital Realty Trust Inc | 0.62% |
| Centene Corp | 0.62% |
| Aptiv PLC | 0.62% |
| Carrier Global Corp Ordinary Shares | 0.61% |
VO’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Marvell Technology Inc, IQVIA Holdings Inc, and Chipotle Mexican Grill Inc at 0.78%, 0.75%, 0.68%, 0.68%, and 0.63%.
Veeva Systems Inc Class A (0.62%), Digital Realty Trust Inc (0.62%), and Centene Corp (0.62%) have a slightly smaller but still significant weight. Aptiv PLC and Carrier Global Corp Ordinary Shares are also represented in the VO’s holdings at 0.62% and 0.61%.
Risk Analysis
| BND | VO | |
| Mean Return | 0.28 | 1.14 |
| R-squared | 99.34 | 92.22 |
| Std. Deviation | 3.14 | 15.65 |
| Alpha | -0.14 | -2.71 |
| Beta | 1.04 | 1.11 |
| Sharpe Ratio | 0.88 | 0.83 |
| Treynor Ratio | 2.64 | 11.32 |
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 Treynor Ratio of 2.64. Its Alpha is -0.14 while BND’s Standard Deviation is 3.14. Furthermore, the fund has a Mean Return of 0.28 and a R-squared of 99.34.
The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a Alpha of -2.71 with a R-squared of 92.22 and a Mean Return of 1.14. Its Standard Deviation is 15.65 while VO’s Treynor Ratio is 11.32. Furthermore, the fund has a Sharpe Ratio of 0.83 and a Beta of 1.11.
BND’s Mean Return is 0.86 points lower than that of VO and its R-squared is 7.12 points higher. With a Standard Deviation of 3.14, BND is slightly less volatile than VO. The Alpha and Beta of BND are 2.57 points higher and 0.07 points lower than VO’s Alpha and Beta.
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Performance
Annual Returns
| Year | BND | VO |
| 2020 | 7.71% | 18.22% |
| 2019 | 8.71% | 31.04% |
| 2018 | -0.04% | -9.21% |
| 2017 | 3.62% | 19.25% |
| 2016 | 2.57% | 11.23% |
| 2015 | 0.39% | -1.34% |
| 2014 | 5.96% | 13.76% |
| 2013 | -2.14% | 35.15% |
| 2012 | 4.04% | 15.98% |
| 2011 | 7.71% | -1.96% |
| 2010 | 6.51% | 25.57% |
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 VO, returning 35.15% on an annual basis. The poorest year for VO in the last ten years was 2018, with a yield of -9.21%. Most years the Vanguard Mid-Cap Index Fund ETF Shares has given investors modest returns, such as in 2014, 2012, and 2020, when gains were 13.76%, 15.98%, and 18.22% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| BND | $10,000 | $15,456 | 4.09% |
| VO | $10,000 | $40,404 | 14.34% |
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 VO, the end total would have been $40,404. This equates to a $30,404 profit over 11 years and a compound annual growth rate (CAGR) of 14.34%.
BND’s CAGR is 10.24 percentage points lower than that of VO and as a result, would have yielded $24,948 less on a $10,000 investment. Thus, BND performed worse than VO by 10.24% annually.
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