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BND vs. VYM: What’s The Difference?

The Vanguard Total Bond Market Index Fund ETF Shares (BND) and the Vanguard High Dividend Yield Index Fund ETF Shares (VYM) are both among the Top 100 ETFs. BND is a Vanguard Intermediate-Term Bond fund and VYM is a Vanguard Large Value fund. So, what’s the difference between BND and VYM? And which fund is better?

The expense ratio of BND is 0.03 percentage points lower than VYM’s (0.03% vs. 0.06%). BND is mostly comprised of AAA bonds while VYM has a high exposure to the financial services sector. Overall, BND has provided lower returns than VYM over the past ten years.

In this article, we’ll compare BND vs. VYM. We’ll look at holdings and industry exposure, as well as at their annual returns and performance. Moreover, I’ll also discuss BND’s and VYM’s fund composition, portfolio growth, and risk metrics and examine how these affect their overall returns.

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Summary

BNDVYM
NameVanguard Total Bond Market Index Fund ETF SharesVanguard High Dividend Yield Index Fund ETF Shares
CategoryIntermediate-Term BondLarge Value
IssuerVanguardVanguard
AUM312.15B48.5B
Avg. Return4.09%12.20%
Div. Yield2.02%2.79%
Expense Ratio0.03%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 High Dividend Yield Index Fund ETF Shares (VYM) is a Large Value fund that is issued by Vanguard. It currently has 48.5B total assets under management and has yielded an average annual return of 12.20% over the past 10 years. The fund has a dividend yield of 2.79% with an expense ratio of 0.06%.

BND’s dividend yield is 0.77% lower than that of VYM (2.02% vs. 2.79%). Also, BND yielded on average 8.10% less per year over the past decade (4.09% vs. 12.20%). The expense ratio of BND is 0.03 percentage points lower than VYM’s (0.03% vs. 0.06%).

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Fund Composition

Holdings

BND - Holdings

BND Bond SectorsWeight
AAA68.72%
BBB16.17%
A11.87%
AA3.34%
Below B0.01%
B0.0%
BB0.0%
US Government0.0%
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.

VYM - Holdings

VYM HoldingsWeight
JPMorgan Chase & Co3.53%
Johnson & Johnson3.28%
The Home Depot Inc2.59%
Procter & Gamble Co2.48%
Bank of America Corp2.35%
Exxon Mobil Corp2.02%
Comcast Corp Class A1.96%
Verizon Communications Inc1.75%
Intel Corp1.71%
Cisco Systems Inc1.69%

VYM’s Top Holdings are JPMorgan Chase & Co, Johnson & Johnson, The Home Depot Inc, Procter & Gamble Co, and Bank of America Corp at 3.53%, 3.28%, 2.59%, 2.48%, and 2.35%.

Exxon Mobil Corp (2.02%), Comcast Corp Class A (1.96%), and Verizon Communications Inc (1.75%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the VYM’s holdings at 1.71% and 1.69%.

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Risk Analysis

BNDVYM
Mean Return0.281.04
R-squared99.3488.88
Std. Deviation3.1412.69
Alpha-0.14-0.7
Beta1.040.88
Sharpe Ratio0.880.93
Treynor Ratio2.6413.24

The Vanguard Total Bond Market Index Fund ETF Shares (BND) has a R-squared of 99.34 with a Alpha of -0.14 and a Sharpe Ratio of 0.88. Its Treynor Ratio is 2.64 while BND’s Mean Return is 0.28. Furthermore, the fund has a Standard Deviation of 3.14 and a Beta of 1.04.

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a Standard Deviation of 12.69 with a Alpha of -0.7 and a R-squared of 88.88. Its Sharpe Ratio is 0.93 while VYM’s Treynor Ratio is 13.24. Furthermore, the fund has a Beta of 0.88 and a Mean Return of 1.04.

BND’s Mean Return is 0.76 points lower than that of VYM and its R-squared is 10.46 points higher. With a Standard Deviation of 3.14, BND is slightly less volatile than VYM. The Alpha and Beta of BND are 0.56 points higher and 0.16 points higher than VYM’s Alpha and Beta.

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Performance

Annual Returns

BND vs. VYM - Annual Returns

YearBNDVYM
20207.71%1.14%
20198.71%24.2%
2018-0.04%-5.87%
20173.62%16.42%
20162.57%16.87%
20150.39%0.33%
20145.96%13.47%
2013-2.14%30.26%
20124.04%12.68%
20117.71%10.5%
20106.51%14.17%

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 VYM, returning 30.26% on an annual basis. The poorest year for VYM in the last ten years was 2018, with a yield of -5.87%. Most years the Vanguard High Dividend Yield Index Fund ETF Shares has given investors modest returns, such as in 2012, 2014, and 2010, when gains were 12.68%, 13.47%, and 14.17% respectively.

Portfolio Growth

BND vs. VYM - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
BND$10,000$15,4564.09%
VYM$10,000$33,91412.20%

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 VYM, the end total would have been $33,914. This equates to a $23,914 profit over 11 years and a compound annual growth rate (CAGR) of 12.20%.

BND’s CAGR is 8.10 percentage points lower than that of VYM and as a result, would have yielded $18,458 less on a $10,000 investment. Thus, BND performed worse than VYM by 8.10% annually.


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