The SPDR S&P 500 ETF Trust (SPY) and the Vanguard Total Bond Market Index Fund ETF Shares (BND) are both among the Top 100 ETFs. SPY is a SPDR State Street Global Advisors Large Blend fund and BND is a Vanguard Intermediate-Term Bond fund. So, what’s the difference between SPY and BND? And which fund is better?
The expense ratio of SPY is 0.06 percentage points higher than BND’s (0.09% vs. 0.03%). SPY also has a high exposure to the technology sector while BND is mostly comprised of AAA bonds. Overall, SPY has provided higher returns than BND over the past ten years.
In this article, we’ll compare SPY vs. BND. We’ll look at risk metrics and holdings, as well as at their performance and fund composition. Moreover, I’ll also discuss SPY’s and BND’s portfolio growth, industry exposure, and annual returns and examine how these affect their overall returns.
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Summary
| SPY | BND | |
| Name | SPDR S&P 500 ETF Trust | Vanguard Total Bond Market Index Fund ETF Shares |
| Category | Large Blend | Intermediate-Term Bond |
| Issuer | SPDR State Street Global Advisors | Vanguard |
| AUM | 374.03B | 312.15B |
| Avg. Return | 14.41% | 4.09% |
| Div. Yield | 1.3% | 2.02% |
| Expense Ratio | 0.09% | 0.03% |
The SPDR S&P 500 ETF Trust (SPY) is a Large Blend fund that is issued by SPDR State Street Global Advisors. It currently has 374.03B total assets under management and has yielded an average annual return of 14.41% over the past 10 years. The fund has a dividend yield of 1.3% with an expense ratio of 0.09%.
The Vanguard Total Bond Market Index Fund ETF Shares (BND) is a Intermediate-Term Bond fund that is issued by Vanguard. It currently has 312.15B total assets under management and has yielded an average annual return of 4.09% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.03%.
SPY’s dividend yield is 0.72% lower than that of BND (1.3% vs. 2.02%). Also, SPY yielded on average 10.31% more per year over the past decade (14.41% vs. 4.09%). The expense ratio of SPY is 0.06 percentage points higher than BND’s (0.09% vs. 0.03%).
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Fund Composition
Holdings
| SPY Holdings | Weight |
| Apple Inc | 5.9% |
| Microsoft Corp | 5.6% |
| Amazon.com Inc | 4.05% |
| Facebook Inc A | 2.29% |
| Alphabet Inc A | 2.02% |
| Alphabet Inc Class C | 1.96% |
| Berkshire Hathaway Inc Class B | 1.45% |
| Tesla Inc | 1.44% |
| NVIDIA Corp | 1.37% |
| JPMorgan Chase & Co | 1.29% |
SPY’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 5.9%, 5.6%, 4.05%, 2.29%, and 2.02%.
Alphabet Inc Class C (1.96%), Berkshire Hathaway Inc Class B (1.45%), and Tesla Inc (1.44%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SPY’s holdings at 1.37% and 1.29%.
| BND Bond Sectors | Weight |
| AAA | 68.72% |
| BBB | 16.17% |
| A | 11.87% |
| AA | 3.34% |
| Below B | 0.01% |
| B | 0.0% |
| BB | 0.0% |
| US Government | 0.0% |
| Others | -0.11% |
BND’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Below B at 68.72%, 16.17%, 11.87%, 3.34%, and 0.01%. The fund is less weighted towards B (0.0%), BB (0.0%), and US Government (0.0%) rated bonds.
Risk Analysis
| SPY | BND | |
| Mean Return | 1.23 | 0.28 |
| R-squared | 100 | 99.34 |
| Std. Deviation | 13.56 | 3.14 |
| Alpha | -0.09 | -0.14 |
| Beta | 1 | 1.04 |
| Sharpe Ratio | 1.04 | 0.88 |
| Treynor Ratio | 14.12 | 2.64 |
The SPDR S&P 500 ETF Trust (SPY) has a Beta of 1 with a Standard Deviation of 13.56 and a Treynor Ratio of 14.12. Its Alpha is -0.09 while SPY’s Sharpe Ratio is 1.04. Furthermore, the fund has a R-squared of 100 and a Mean Return of 1.23.
The Vanguard Total Bond Market Index Fund ETF Shares (BND) has a Alpha of -0.14 with a Mean Return of 0.28 and a Sharpe Ratio of 0.88. Its Beta is 1.04 while BND’s Standard Deviation is 3.14. Furthermore, the fund has a R-squared of 99.34 and a Treynor Ratio of 2.64.
SPY’s Mean Return is 0.95 points higher than that of BND and its R-squared is 0.66 points higher. With a Standard Deviation of 13.56, SPY is slightly more volatile than BND. The Alpha and Beta of SPY are 0.05 points higher and 0.04 points lower than BND’s Alpha and Beta.
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Performance
Annual Returns
| Year | SPY | BND |
| 2020 | 18.25% | 7.71% |
| 2019 | 31.29% | 8.71% |
| 2018 | -4.45% | -0.04% |
| 2017 | 21.69% | 3.62% |
| 2016 | 11.8% | 2.57% |
| 2015 | 1.34% | 0.39% |
| 2014 | 13.53% | 5.96% |
| 2013 | 32.21% | -2.14% |
| 2012 | 15.84% | 4.04% |
| 2011 | 2.06% | 7.71% |
| 2010 | 14.93% | 6.51% |
SPY had its best year in 2013 with an annual return of 32.21%. SPY’s worst year over the past decade yielded -4.45% and occurred in 2018. In most years the SPDR S&P 500 ETF Trust provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.53%, 14.93%, and 15.84% respectively.
The year 2019 was the strongest year for BND, returning 8.71% on an annual basis. The poorest year for BND in the last ten years was 2013, with a yield of -2.14%. Most years the Vanguard Total Bond Market Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2014, when gains were 3.62%, 4.04%, and 5.96% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| SPY | $10,000 | $41,712 | 14.41% |
| BND | $10,000 | $15,456 | 4.09% |
A $10,000 investment in SPY would have resulted in a final balance of $41,712. This is a profit of $31,712 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.41%.
With a $10,000 investment in BND, the end total would have been $15,456. This equates to a $5,456 profit over 11 years and a compound annual growth rate (CAGR) of 4.09%.
SPY’s CAGR is 10.31 percentage points higher than that of BND and as a result, would have yielded $26,256 more on a $10,000 investment. Thus, SPY outperformed BND by 10.31% annually.
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