BSV vs. SHY: What’s The Difference?

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. BSV is a Vanguard Short-Term Bond fund and SHY is a iShares Short Government fund. So, what’s the difference between BSV and SHY? And which fund is better?

The expense ratio of BSV is 0.10 percentage points lower than SHY’s (0.05% vs. 0.15%). BSV is mostly comprised of AAA bonds and SHY has a high exposure to AAA bond. Overall, BSV has provided higher returns than SHY over the past ten years.

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

Summary

BSV SHY
Name Vanguard Short-Term Bond Index Fund ETF Shares iShares 1-3 Year Treasury Bond ETF
Category Short-Term Bond Short Government
Issuer Vanguard iShares
AUM 67.71B 19.51B
Avg. Return 2.27% 1.27%
Div. Yield 1.48% 0.46%
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 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.

BSV’s dividend yield is 1.02% higher than that of SHY (1.48% vs. 0.46%). Also, BSV yielded on average 1.00% more per year over the past decade (2.27% vs. 1.27%). The expense ratio of BSV is 0.10 percentage points lower than SHY’s (0.05% vs. 0.15%).

Fund Composition

Holdings

BSV - 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.

SHY - Holdings

SHY Bond Sectors Weight
AAA 99.67%
Others 0.33%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

Risk Analysis

BSV SHY
Mean Return 0.16 0.09
R-squared 78.38 39.11
Std. Deviation 1.33 0.89
Alpha 0.21 -0.03
Beta 0.38 0.18
Sharpe Ratio 0.98 0.54
Treynor Ratio 3.33 2.6

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) has a Alpha of 0.21 with a Treynor Ratio of 3.33 and a Beta of 0.38. Its Standard Deviation is 1.33 while BSV’s Mean Return is 0.16. Furthermore, the fund has a Sharpe Ratio of 0.98 and a R-squared of 78.38.

The iShares 1-3 Year Treasury Bond ETF (SHY) has a Alpha of -0.03 with a Mean Return of 0.09 and a Standard Deviation of 0.89. Its Treynor Ratio is 2.6 while SHY’s R-squared is 39.11. Furthermore, the fund has a Beta of 0.18 and a Sharpe Ratio of 0.54.

BSV’s Mean Return is 0.07 points higher than that of SHY and its R-squared is 39.27 points higher. With a Standard Deviation of 1.33, BSV is slightly more volatile than SHY. The Alpha and Beta of BSV are 0.24 points higher and 0.20 points higher than SHY’s Alpha and Beta.

Performance

Annual Returns

BSV vs. SHY - Annual Returns

Year BSV SHY
2020 4.67% 3.01%
2019 4.92% 3.42%
2018 1.34% 1.45%
2017 1.2% 0.27%
2016 1.42% 0.75%
2015 0.92% 0.43%
2014 1.32% 0.48%
2013 0.17% 0.23%
2012 1.98% 0.31%
2011 3.04% 1.43%
2010 4.0% 2.23%

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 SHY, returning 3.42% on an annual basis. The poorest year for SHY in the last ten years was 2013, with a yield of 0.23%. Most years the iShares 1-3 Year Treasury Bond ETF has given investors modest returns, such as in 2014, 2016, and 2011, when gains were 0.48%, 0.75%, and 1.43% respectively.

Portfolio Growth

BSV vs. SHY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
BSV $10,000 $12,785 2.27%
SHY $10,000 $11,486 1.27%

A $10,000 investment in BSV would have resulted in a final balance of $12,785. This is a profit of $2,785 over 11 years and amounts to a compound annual growth rate (CAGR) of 2.27%.

With a $10,000 investment in SHY, the end total would have been $11,486. This equates to a $1,486 profit over 11 years and a compound annual growth rate (CAGR) of 1.27%.

BSV’s CAGR is 1.00 percentage points higher than that of SHY and as a result, would have yielded $1,299 more on a $10,000 investment. Thus, BSV outperformed SHY by 1.00% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply