The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the Vanguard Total Bond Market Index Fund ETF Shares (BND) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and BND is a Vanguard Intermediate-Term Bond fund. So, what’s the difference between VEA and BND? And which fund is better?
The expense ratio of VEA is 0.02 percentage points higher than BND’s (0.05% vs. 0.03%). VEA also has a high exposure to the financial services sector while BND is mostly comprised of AAA bonds. Overall, VEA has provided higher returns than BND over the past ten years.
In this article, we’ll compare VEA vs. BND. We’ll look at industry exposure and portfolio growth, as well as at their holdings and performance. Moreover, I’ll also discuss VEA’s and BND’s risk metrics, fund composition, and annual returns and examine how these affect their overall returns.
|Name||Vanguard FTSE Developed Markets Index Fund ETF Shares||Vanguard Total Bond Market Index Fund ETF Shares|
|Category||Foreign Large Blend||Intermediate-Term Bond|
The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 157.48B total assets under management and has yielded an average annual return of 7.05% over the past 10 years. The fund has a dividend yield of 2.49% with an expense ratio of 0.05%.
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%.
VEA’s dividend yield is 0.47% higher than that of BND (2.49% vs. 2.02%). Also, VEA yielded on average 2.96% more per year over the past decade (7.05% vs. 4.09%). The expense ratio of VEA is 0.02 percentage points higher than BND’s (0.05% vs. 0.03%).
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|Samsung Electronics Co Ltd||1.4%|
|ASML Holding NV||1.16%|
|Roche Holding AG||1.1%|
|Toyota Motor Corp||0.92%|
|LVMH Moet Hennessy Louis Vuitton SE||0.84%|
|Shopify Inc A||0.7%|
VEA’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.5%, 1.4%, 1.16%, 1.1%, and 0.92%.
LVMH Moet Hennessy Louis Vuitton SE (0.84%), Novartis AG (0.82%), and Shopify Inc A (0.7%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the VEA’s holdings at 0.67% and 0.66%.
|BND Bond Sectors||Weight|
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.
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VEA had its best year in 2017 with an annual return of 26.44%. VEA’s worst year over the past decade yielded -14.47% and occurred in 2018. In most years the Vanguard FTSE Developed Markets Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 2.51%, 8.47%, and 10.29% 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VEA would have resulted in a final balance of $19,290. This is a profit of $9,290 over 11 years and amounts to a compound annual growth rate (CAGR) of 7.05%.
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%.
VEA’s CAGR is 2.96 percentage points higher than that of BND and as a result, would have yielded $3,834 more on a $10,000 investment. Thus, VEA outperformed BND by 2.96% annually.
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