BND is generally a popular option for many, yet I personally favor BLV ETF over it.
In the realm of investment-grade bond ETFs, two standout options are the Vanguard Total Bond Market ETF (BND) and the Vanguard Long-Term Bond ETF (BLV). The main differences between these two lie in their yield and maturity profiles.
The Vanguard Total Bond Market ETF (BND) offers a moderate yield of approximately 4.7%, with an average maturity around 5 to 10 years. BND provides a broad exposure to the U.S. investment-grade bond market, balancing yield with interest rate risk. This results in a lower interest rate risk due to its shorter maturity.
On the other hand, the Vanguard Long-Term Bond ETF (BLV) concentrates on longer-term bonds with maturities exceeding 10 years and an average effective maturity over 22 years. This longer duration increases interest rate sensitivity but also offers a higher yield, around 5.4% to 5.5%.
BLV provides diversified exposure to the long-term, investment-grade U.S. bond market. More than half of BLV's bonds (51.5%) are from the U.S. government, with the rest rated AAA, AA, A, and BBB from various sectors such as industrial, finance, utility, foreign, and others.
Given its currently higher yield and the expectation that rates should continue falling, BLV is poised to deliver higher returns compared to BND. However, this comes with a higher interest rate risk, meaning BLV is more sensitive to short-term interest rate changes. BND, in comparison, has a larger percentage of short-term bonds compared to BLV.
Investors seeking higher-income potential over the long term may find BLV appealing due to its higher yield and potential for price appreciation when interest rates decline. On the other hand, BND, despite being the biggest bond ETF, provides broad exposure to the entire U.S. bond market, offering a more balanced, intermediate maturity exposure with lower yield and interest rate risk, suitable for investors seeking income stability.
Sources: [1][2][3][5]
[1] The Vanguard Long-Term Bond ETF (BLV) provides diversified exposure to the long-term, investment-grade U.S. bond market. [2] More than half of BLV's bonds (51.5%) are from the U.S. government. [3] The rest of BLV's bonds are rated AAA (1.2%), AA (5.5%), A (20.4%), and BBB (21.3%) from issuers in the industrial (29.6%), finance (7.5%), utility (6%), foreign (2.9%), and other (2.5%) sectors. [5] Given its currently higher yield and the fact that rates should continue falling, BLV should deliver higher returns compared to BND from here.
- For individuals aiming for higher income potential in the long term, the Vanguard Long-Term Bond ETF (BLV), with its higher yield, could be an attractive choice due to its potential for price appreciation when interest rates decrease.
- In the realm of personal-finance decisions, one might consider the Vanguard Long-Term Bond ETF (BLV) as it boasts a higher yield than the Vanguard Total Bond Market ETF (BND), making it a candidate for higher returns, especially with the expectation that interest rates will continue falling.
- When it comes to investing in the U.S. bond market, the Vanguard Long-Term Bond ETF (BLV) offers a higher yield than the Vanguard Total Bond Market ETF (BND), but this comes with a risk of higher interest rate sensitivity due to its longer maturity and duration.
