The Vanguard Growth Index Fund ETF Shares (VUG) and the Vanguard Total Bond Market Index Fund ETF Shares (BND) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and BND is a Vanguard Intermediate-Term Bond fund. So, what’s the difference between VUG and BND? And which fund is better?
The expense ratio of VUG is 0.01 percentage points higher than BND’s (0.04% vs. 0.03%). VUG also has a high exposure to the technology sector while BND is mostly comprised of AAA bonds. Overall, VUG has provided higher returns than BND over the past ten years.
In this article, we’ll compare VUG vs. BND. We’ll look at portfolio growth and annual returns, as well as at their holdings and risk metrics. Moreover, I’ll also discuss VUG’s and BND’s performance, industry exposure, and fund composition and examine how these affect their overall returns.
Summary
| VUG | BND | |
| Name | Vanguard Growth Index Fund ETF Shares | Vanguard Total Bond Market Index Fund ETF Shares |
| Category | Large Growth | Intermediate-Term Bond |
| Issuer | Vanguard | Vanguard |
| AUM | 165.53B | 312.15B |
| Avg. Return | 17.58% | 4.09% |
| Div. Yield | 0.57% | 2.02% |
| Expense Ratio | 0.04% | 0.03% |
The Vanguard Growth Index Fund ETF Shares (VUG) is a Large Growth fund that is issued by Vanguard. It currently has 165.53B total assets under management and has yielded an average annual return of 17.58% over the past 10 years. The fund has a dividend yield of 0.57% with an expense ratio of 0.04%.
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%.
VUG’s dividend yield is 1.45% lower than that of BND (0.57% vs. 2.02%). Also, VUG yielded on average 13.48% more per year over the past decade (17.58% vs. 4.09%). The expense ratio of VUG is 0.01 percentage points higher than BND’s (0.04% vs. 0.03%).
Fund Composition
Holdings
| VUG Holdings | Weight |
| Apple Inc | 10.13% |
| Microsoft Corp | 9.52% |
| Amazon.com Inc | 6.88% |
| Facebook Inc Class A | 3.89% |
| Alphabet Inc Class A | 3.43% |
| Alphabet Inc Class C | 3.22% |
| Tesla Inc | 2.44% |
| NVIDIA Corp | 2.21% |
| Visa Inc Class A | 1.78% |
| PayPal Holdings Inc | 1.6% |
VUG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.13%, 9.52%, 6.88%, 3.89%, and 3.43%.
Alphabet Inc Class C (3.22%), Tesla Inc (2.44%), and NVIDIA Corp (2.21%) have a slightly smaller but still significant weight. Visa Inc Class A and PayPal Holdings Inc are also represented in the VUG’s holdings at 1.78% and 1.6%.
| 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
| VUG | BND | |
| Mean Return | 1.44 | 0.28 |
| R-squared | 92.48 | 99.34 |
| Std. Deviation | 14.76 | 3.14 |
| Alpha | 1.81 | -0.14 |
| Beta | 1.04 | 1.04 |
| Sharpe Ratio | 1.13 | 0.88 |
| Treynor Ratio | 16.13 | 2.64 |
The Vanguard Growth Index Fund ETF Shares (VUG) has a Beta of 1.04 with a Treynor Ratio of 16.13 and a Mean Return of 1.44. Its Sharpe Ratio is 1.13 while VUG’s Alpha is 1.81. Furthermore, the fund has a R-squared of 92.48 and a Standard Deviation of 14.76.
The Vanguard Total Bond Market Index Fund ETF Shares (BND) has a Beta of 1.04 with a Standard Deviation of 3.14 and a Mean Return of 0.28. Its Sharpe Ratio is 0.88 while BND’s Alpha is -0.14. Furthermore, the fund has a R-squared of 99.34 and a Treynor Ratio of 2.64.
VUG’s Mean Return is 1.16 points higher than that of BND and its R-squared is 6.86 points lower. With a Standard Deviation of 14.76, VUG is slightly more volatile than BND. The Alpha and Beta of VUG are 1.95 points higher and 0.00 points lower than BND’s Alpha and Beta.
Performance
Annual Returns
| Year | VUG | BND |
| 2020 | 40.16% | 7.71% |
| 2019 | 37.26% | 8.71% |
| 2018 | -3.32% | -0.04% |
| 2017 | 27.8% | 3.62% |
| 2016 | 6.13% | 2.57% |
| 2015 | 3.32% | 0.39% |
| 2014 | 13.62% | 5.96% |
| 2013 | 32.38% | -2.14% |
| 2012 | 17.03% | 4.04% |
| 2011 | 1.87% | 7.71% |
| 2010 | 17.11% | 6.51% |
VUG had its best year in 2020 with an annual return of 40.16%. VUG’s worst year over the past decade yielded -3.32% and occurred in 2018. In most years the Vanguard Growth Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 13.62%, 17.03%, and 17.11% 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 |
| VUG | $10,000 | $54,735 | 17.58% |
| BND | $10,000 | $15,456 | 4.09% |
A $10,000 investment in VUG would have resulted in a final balance of $54,735. This is a profit of $44,735 over 11 years and amounts to a compound annual growth rate (CAGR) of 17.58%.
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%.
VUG’s CAGR is 13.48 percentage points higher than that of BND and as a result, would have yielded $39,279 more on a $10,000 investment. Thus, VUG outperformed BND by 13.48% annually.
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