Which Short-Term Bond ETF Is the Better Buy: Vanguard’s Treasury Fund VGSH or Bond Fund BSV?

Résumé détaillé

BSV offers higher yield but greater volatility, while VGSH provides pure Treasury exposure with lower drawdown risk. Both charge just 0.03% annually.

Vanguard Short-Term Bond ETF (NYSEMKT:BSV) offers broader credit exposure and a higher yield, while Vanguard Short-Term Treasury ETF (NASDAQ:VGSH) provides a more conservative, pure-play Treasury portfolio for identical costs.

Both Vanguard Short-Term Treasury ETF and Vanguard Short-Term Bond ETF target the short end of the yield curve, providing investors with a way to manage cash while seeking stability. While they share the same ultra-low expense ratio, the primary difference lies in credit quality and diversification. VGSH sticks strictly to government debt, whereas BSV adds corporate and international bonds.

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

These funds are exceptionally affordable with identical 0.03% expense ratios. However, BSV provides a higher payout with its 4.5% yield, compared to the 4.1% offered by VGSH. This yield gap reflects the additional risk inherent in BSV's corporate bond holdings.

Vanguard Short-Term Bond ETF aims to mirror a float-adjusted index that includes investment-grade debt securities with maturities between one and five years. It is a fixed income fund with no equity sector breakdown, and its 3,155 holdings include the United States Treasury Note/Bond 4.38% 08/31/2031 at 1.70% and the United States Treasury Note/Bond 5.00% 09/30/2031 at 1.32%. This broader mandate allows it to capture credit spreads beyond Treasury yields. The fund was launched in 2007.

Vanguard Short-Term Treasury ETF employs a more concentrated strategy by tracking the Bloomberg US Treasury 1--3 Year Index. Like its peer, it is a fixed income fund with no equity sector breakdown.

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I'd go with VGSH, because the small bonus for owning corporate bonds instead of…

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