The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. BSV is a Vanguard Short-Term Bond fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between BSV and VMBS? And which fund is better?
BSV and VMBS have the same expense ratio: 0.05%. BSV is mostly comprised of AAA bonds and VMBS has a high exposure to AAA bond. Overall, BSV has provided lower returns than VMBS over the past ten years.
In this article, we’ll compare BSV vs. VMBS. We’ll look at industry exposure and annual returns, as well as at their risk metrics and holdings. Moreover, I’ll also discuss BSV’s and VMBS’s fund composition, performance, and portfolio growth and examine how these affect their overall returns.
|Name||Vanguard Short-Term Bond Index Fund ETF Shares||Vanguard Mortgage-Backed Securities Index Fund ETF Shares|
|Category||Short-Term Bond||Intermediate Government|
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 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%.
BSV’s dividend yield is 0.25% higher than that of VMBS (1.48% vs. 1.23%). Also, BSV yielded on average 0.62% less per year over the past decade (2.27% vs. 2.89%). BSV and VMBS have the same expense ratio: 0.05%.
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|BSV Bond Sectors||Weight|
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.
|VMBS Bond Sectors||Weight|
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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The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) has a Beta of 0.38 with a Sharpe Ratio of 0.98 and a R-squared of 78.38. Its Mean Return is 0.16 while BSV’s Treynor Ratio is 3.33. Furthermore, the fund has a Standard Deviation of 1.33 and a Alpha of 0.21.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Beta of 0.54 with a Sharpe Ratio of 0.94 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 Treynor Ratio of 3.47.
BSV’s Mean Return is 0.05 points lower than that of VMBS and its R-squared is 12.60 points higher. With a Standard Deviation of 1.33, BSV is slightly less volatile than VMBS. The Alpha and Beta of BSV are 0.16 points lower and 0.16 points lower than VMBS’s Alpha and Beta.
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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 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in BSV would have resulted in a final balance of $12,294. This is a profit of $2,294 over 10 years and amounts to a compound annual growth rate (CAGR) of 2.27%.
With a $10,000 investment in VMBS, the end total would have been $13,265. This equates to a $3,265 profit over 10 years and a compound annual growth rate (CAGR) of 2.89%.
BSV’s CAGR is 0.62 percentage points lower than that of VMBS and as a result, would have yielded $971 less on a $10,000 investment. Thus, BSV performed worse than VMBS by 0.62% annually.
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