The Vanguard Short-Term Treasury ETF (VGSH) and Vanguard Short-Term Bond ETF (BSV) are both low-cost options targeting short-term, high-quality bonds, but they differ significantly in their composition and risk profiles. VGSH focuses exclusively on U.S. Treasuries, offering maximum safety and minimal credit risk, while BSV includes a broader mix of government, investment-grade corporate, and some international bonds, resulting in higher recent returns but also greater volatility.
Both ETFs currently have identical expense ratios of 0.03% and yield 3.9%, making them cost-effective choices for investors. However, BSV’s diversified approach has led to a higher one-year return compared to VGSH, although both funds have shown similar growth over five years. Investors should note that BSV’s wider bond mix comes with a deeper maximum drawdown during market stress, indicating increased risk.
For portfolio managers and traders, the choice between VGSH and BSV hinges on risk tolerance and investment goals: VGSH is suited for those prioritizing capital preservation, while BSV may appeal to those seeking enhanced yield despite accepting higher volatility.
Source: fool.com