The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. BSV is a Vanguard Short-Term Bond fund and QUAL is a iShares Large Blend fund. So, what’s the difference between BSV and QUAL? And which fund is better?
The expense ratio of BSV is 0.10 percentage points lower than QUAL’s (0.05% vs. 0.15%). BSV is mostly comprised of AAA bonds while QUAL has a high exposure to the technology sector. Overall, BSV has provided lower returns than QUAL over the past ten years.
In this article, we’ll compare BSV vs. QUAL. We’ll look at performance and risk metrics, as well as at their fund composition and industry exposure. Moreover, I’ll also discuss BSV’s and QUAL’s portfolio growth, annual returns, and holdings and examine how these affect their overall returns.
Summary
| BSV | QUAL | |
| Name | Vanguard Short-Term Bond Index Fund ETF Shares | iShares MSCI USA Quality Factor ETF |
| Category | Short-Term Bond | Large Blend |
| Issuer | Vanguard | iShares |
| AUM | 67.71B | 23.93B |
| Avg. Return | 2.27% | 13.42% |
| Div. Yield | 1.48% | 1.29% |
| Expense Ratio | 0.05% | 0.15% |
The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) is a Short-Term Bond fund that is issued by Vanguard. It currently has 67.71B total assets under management and has yielded an average annual return of 2.27% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.05%.
The iShares MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.
BSV’s dividend yield is 0.19% higher than that of QUAL (1.48% vs. 1.29%). Also, BSV yielded on average 11.15% less per year over the past decade (2.27% vs. 13.42%). The expense ratio of BSV is 0.10 percentage points lower than QUAL’s (0.05% vs. 0.15%).
Fund Composition
Holdings
| BSV Bond Sectors | Weight |
| AAA | 71.65% |
| BBB | 13.08% |
| A | 11.95% |
| AA | 3.28% |
| Others | 0.03% |
| Below B | 0.01% |
| B | 0.0% |
| BB | 0.0% |
| US Government | 0.0% |
BSV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 71.65%, 13.08%, 11.95%, 3.28%, and 0.03%. The fund is less weighted towards Below B (0.01%), B (0.0%), and BB (0.0%) rated bonds.
| QUAL Holdings | Weight |
| Facebook Inc Class A | 4.77% |
| Nike Inc Class B | 4.05% |
| Microsoft Corp | 3.54% |
| Apple Inc | 3.52% |
| Johnson & Johnson | 2.99% |
| BlackRock Inc | 2.87% |
| Target Corp | 2.8% |
| Mastercard Inc Class A | 2.72% |
| NVIDIA Corp | 2.71% |
| Alphabet Inc Class A | 2.49% |
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
Risk Analysis
| BSV | QUAL | |
| Mean Return | 0.16 | 0 |
| R-squared | 78.38 | 0 |
| Std. Deviation | 1.33 | 0 |
| Alpha | 0.21 | 0 |
| Beta | 0.38 | 0 |
| Sharpe Ratio | 0.98 | 0 |
| Treynor Ratio | 3.33 | 0 |
The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) has a Mean Return of 0.16 with a R-squared of 78.38 and a Alpha of 0.21. Its Beta is 0.38 while BSV’s Sharpe Ratio is 0.98. Furthermore, the fund has a Treynor Ratio of 3.33 and a Standard Deviation of 1.33.
The iShares MSCI USA Quality Factor ETF (QUAL) has a Alpha of 0 with a Standard Deviation of 0 and a Mean Return of 0. Its Sharpe Ratio is 0 while QUAL’s Treynor Ratio is 0. Furthermore, the fund has a Beta of 0 and a R-squared of 0.
BSV’s Mean Return is 0.16 points higher than that of QUAL and its R-squared is 78.38 points higher. With a Standard Deviation of 1.33, BSV is slightly more volatile than QUAL. The Alpha and Beta of BSV are 0.21 points higher and 0.38 points higher than QUAL’s Alpha and Beta.
Performance
Annual Returns
| Year | BSV | QUAL |
| 2020 | 4.67% | 16.96% |
| 2019 | 4.92% | 34.14% |
| 2018 | 1.34% | -5.77% |
| 2017 | 1.2% | 22.26% |
| 2016 | 1.42% | 9.18% |
| 2015 | 0.92% | 5.56% |
| 2014 | 1.32% | 11.62% |
| 2013 | 0.17% | 0.0% |
| 2012 | 1.98% | 0.0% |
| 2011 | 3.04% | 0.0% |
| 2010 | 4.0% | 0.0% |
BSV had its best year in 2019 with an annual return of 4.92%. BSV’s worst year over the past decade yielded 0.17% and occurred in 2013. In most years the Vanguard Short-Term Bond Index Fund ETF Shares provided moderate returns such as in 2018, 2016, and 2012 where annual returns amounted to 1.34%, 1.42%, and 1.98% respectively.
The year 2019 was the strongest year for QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| BSV | $10,000 | $11,679 | 2.27% |
| QUAL | $10,000 | $23,251 | 13.42% |
A $10,000 investment in BSV would have resulted in a final balance of $11,679. This is a profit of $1,679 over 7 years and amounts to a compound annual growth rate (CAGR) of 2.27%.
With a $10,000 investment in QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.
BSV’s CAGR is 11.15 percentage points lower than that of QUAL and as a result, would have yielded $11,572 less on a $10,000 investment. Thus, BSV performed worse than QUAL by 11.15% annually.
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