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BNDX vs. VMBS: What’s The Difference?

The Vanguard Total International Bond Index Fund ETF Shares (BNDX) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. BNDX is a Vanguard N/A fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between BNDX and VMBS? And which fund is better?

The expense ratio of BNDX is 0.03 percentage points higher than VMBS’s (0.08% vs. 0.05%). BNDX is mostly comprised of A bonds and VMBS has a high exposure to AAA bond. Overall, BNDX has provided higher returns than VMBS over the past ten years.

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

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Summary

BNDXVMBS
NameVanguard Total International Bond Index Fund ETF SharesVanguard Mortgage-Backed Securities Index Fund ETF Shares
CategoryN/AIntermediate Government
IssuerVanguardVanguard
AUM116.41B16.61B
Avg. Return4.63%2.89%
Div. Yield0.94%1.23%
Expense Ratio0.08%0.05%

The Vanguard Total International Bond Index Fund ETF Shares (BNDX) is a N/A fund that is issued by Vanguard. It currently has 116.41B total assets under management and has yielded an average annual return of 4.63% over the past 10 years. The fund has a dividend yield of 0.94% with an expense ratio of 0.08%.

The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) is a Intermediate Government fund that is issued by Vanguard. It currently has 16.61B total assets under management and has yielded an average annual return of 2.89% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.05%.

BNDX’s dividend yield is 0.29% lower than that of VMBS (0.94% vs. 1.23%). Also, BNDX yielded on average 1.74% more per year over the past decade (4.63% vs. 2.89%). The expense ratio of BNDX is 0.03 percentage points higher than VMBS’s (0.08% vs. 0.05%).

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Fund Composition

Holdings

BNDX - Holdings

BNDX Bond SectorsWeight
A29.19%
AA26.79%
AAA21.59%
BBB19.41%
Others1.57%
Below B1.45%
B0.0%
BB0.0%
US Government0.0%

BNDX’s Top Bond Sectors are ratings of A, AA, AAA, BBB, and Others at 29.19%, 26.79%, 21.59%, 19.41%, and 1.57%. The fund is less weighted towards Below B (1.45%), B (0.0%), and BB (0.0%) rated bonds.

VMBS - Holdings

VMBS Bond SectorsWeight
AAA100.01%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%
Others-0.01%

VMBS’s Top Bond Sectors are ratings of AAA, Below B, B, BB, and BBB at 100.01%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.

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Risk Analysis

BNDXVMBS
Mean Return00.21
R-squared065.78
Std. Deviation02.02
Alpha00.37
Beta00.54
Sharpe Ratio00.94
Treynor Ratio03.47

The Vanguard Total International Bond Index Fund ETF Shares (BNDX) has a Sharpe Ratio of 0 with a R-squared of 0 and a Standard Deviation of 0. Its Alpha is 0 while BNDX’s Beta is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Mean Return of 0.

The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Beta of 0.54 with a Treynor Ratio of 3.47 and a Standard Deviation of 2.02. Its R-squared is 65.78 while VMBS’s Mean Return is 0.21. Furthermore, the fund has a Alpha of 0.37 and a Sharpe Ratio of 0.94.

BNDX’s Mean Return is 0.21 points lower than that of VMBS and its R-squared is 65.78 points lower. With a Standard Deviation of 0, BNDX is slightly less volatile than VMBS. The Alpha and Beta of BNDX are 0.37 points lower and 0.54 points lower than VMBS’s Alpha and Beta.

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Performance

Annual Returns

BNDX vs. VMBS - Annual Returns

YearBNDXVMBS
20204.6%3.77%
20197.88%6.17%
20182.94%0.87%
20172.4%2.37%
20164.67%1.43%
20151.08%1.43%
20148.83%5.81%
20130.0%-1.28%
20120.0%2.47%
20110.0%5.89%
20100.0%5.24%

BNDX had its best year in 2014 with an annual return of 8.83%. BNDX’s worst year over the past decade yielded 0.0% and occurred in 2013. In most years the Vanguard Total International Bond Index Fund ETF Shares provided moderate returns such as in 2015, 2017, and 2018 where annual returns amounted to 1.08%, 2.4%, and 2.94% respectively.

The year 2019 was the strongest year for VMBS, returning 6.17% on an annual basis. The poorest year for VMBS in the last ten years was 2013, with a yield of -1.28%. Most years the Vanguard Mortgage-Backed Securities Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 2.37%, 2.47%, and 3.77% respectively.

Portfolio Growth

BNDX vs. VMBS - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
BNDX$10,000$13,6954.63%
VMBS$10,000$12,3842.89%

A $10,000 investment in BNDX would have resulted in a final balance of $13,695. This is a profit of $3,695 over 7 years and amounts to a compound annual growth rate (CAGR) of 4.63%.

With a $10,000 investment in VMBS, the end total would have been $12,384. This equates to a $2,384 profit over 7 years and a compound annual growth rate (CAGR) of 2.89%.

BNDX’s CAGR is 1.74 percentage points higher than that of VMBS and as a result, would have yielded $1,311 more on a $10,000 investment. Thus, BNDX outperformed VMBS by 1.74% annually.


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