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BSV vs. USMV: What’s The Difference?

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) and the iShares MSCI USA Min Vol Factor ETF (USMV) are both among the Top 100 ETFs. BSV is a Vanguard Short-Term Bond fund and USMV is a iShares Large Blend fund. So, what’s the difference between BSV and USMV? And which fund is better?

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

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

BSVUSMV
NameVanguard Short-Term Bond Index Fund ETF SharesiShares MSCI USA Min Vol Factor ETF
CategoryShort-Term BondLarge Blend
IssuerVanguardiShares
AUM67.71B27.6B
Avg. Return2.27%13.89%
Div. Yield1.48%1.5%
Expense Ratio0.05%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 Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

BSV’s dividend yield is 0.02% lower than that of USMV (1.48% vs. 1.5%). Also, BSV yielded on average 11.62% less per year over the past decade (2.27% vs. 13.89%). The expense ratio of BSV is 0.10 percentage points lower than USMV’s (0.05% vs. 0.15%).

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Fund Composition

Holdings

BSV - Holdings

BSV Bond SectorsWeight
AAA71.65%
BBB13.08%
A11.95%
AA3.28%
Others0.03%
Below B0.01%
B0.0%
BB0.0%
US Government0.0%

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.

USMV - Holdings

USMV HoldingsWeight
Eli Lilly and Co1.64%
Microsoft Corp1.62%
T-Mobile US Inc1.51%
Accenture PLC Class A1.51%
Visa Inc Class A1.49%
Waste Management Inc1.45%
Adobe Inc1.45%
The Kroger Co1.44%
Johnson & Johnson1.42%
Gilead Sciences Inc1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

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Risk Analysis

BSVUSMV
Mean Return0.160
R-squared78.380
Std. Deviation1.330
Alpha0.210
Beta0.380
Sharpe Ratio0.980
Treynor Ratio3.330

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

The iShares MSCI USA Min Vol Factor ETF (USMV) has a Mean Return of 0 with a Beta of 0 and a Alpha of 0. Its Treynor Ratio is 0 while USMV’s R-squared is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Standard Deviation of 0.

BSV’s Mean Return is 0.16 points higher than that of USMV and its R-squared is 78.38 points higher. With a Standard Deviation of 1.33, BSV is slightly more volatile than USMV. The Alpha and Beta of BSV are 0.21 points higher and 0.38 points higher than USMV’s Alpha and Beta.

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Performance

Annual Returns

BSV vs. USMV - Annual Returns

YearBSVUSMV
20204.67%5.6%
20194.92%27.77%
20181.34%1.36%
20171.2%18.97%
20161.42%10.5%
20150.92%5.5%
20141.32%16.34%
20130.17%25.11%
20121.98%11.04%
20113.04%0.0%
20104.0%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 USMV, returning 27.77% on an annual basis. The poorest year for USMV in the last ten years was 2011, with a yield of 0.0%. Most years the iShares MSCI USA Min Vol Factor ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 5.6%, 10.5%, and 11.04% respectively.

Portfolio Growth

BSV vs. USMV - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
BSV$10,000$11,6992.27%
USMV$10,000$27,60713.89%

A $10,000 investment in BSV would have resulted in a final balance of $11,699. This is a profit of $1,699 over 8 years and amounts to a compound annual growth rate (CAGR) of 2.27%.

With a $10,000 investment in USMV, the end total would have been $27,607. This equates to a $17,607 profit over 8 years and a compound annual growth rate (CAGR) of 13.89%.

BSV’s CAGR is 11.62 percentage points lower than that of USMV and as a result, would have yielded $15,908 less on a $10,000 investment. Thus, BSV performed worse than USMV by 11.62% annually.


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