SMB and BSV Are Both Short-Term Bond Funds. Your Tax Bracket Should Drive the Choice.
Key Points
BSV charges a slightly lower expense ratio and delivers a higher yield than SMB.
SMB and BSV both focus on short-duration bonds, but BSV's portfolio is far more concentrated and much larger in assets under management.
BSV experienced a deeper drawdown over five years, and SMB had lower long-term growth.
- 10 stocks we like better than Vanguard Bond Index Funds - Vanguard Short-Term Bond ETF ›
The VanEck Short Muni ETF (NYSEMKT:SMB) and Vanguard Short-Term Bond ETF (NYSEMKT:BSV) both target short-duration fixed income, but BSV offers a higher yield, lower fees, and a much larger asset base, while SMB provides a broader portfolio of municipal bonds and slightly smaller drawdowns.
Both SMB and BSV are designed for investors seeking stability and modest income from short-term bonds. While SMB specializes in tax-exempt U.S. municipal bonds, BSV takes a broader approach with investment-grade government and corporate bonds, setting up a contrast in risk, yield, and diversification for this match-up.
Snapshot (cost & size)
| Metric | SMB | BSV |
|---|---|---|
| Issuer | VanEck | Vanguard |
| Expense ratio | 0.07% | 0.03% |
| 1-yr return (as of 2026-04-15) | 5.2% | 4.4% |
| Dividend yield | 2.7% | 3.9% |
| Beta | 0.10 | 0.09 |
| AUM | $305 million | $44 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months.
BSV looks more affordable with a 0.03% expense ratio compared to SMB's 0.07%, and it also delivers a higher yield, making it potentially more appealing for cost-conscious investors seeking income.
Performance & risk comparison
| Metric | SMB | BSV |
|---|---|---|
| Max drawdown (5 y) | -7.43% | -8.53% |
| Growth of $1,000 over 5 years | $1,058 | $1,089 |
What's inside
BSV tracks a broad index of short-term U.S. government and investment-grade corporate bonds, with maturities between one and five years. The fund has a long track record, having launched in 2007, and is backed by roughly $44 billion in assets.
SMB, by contrast, focuses exclusively on short-term municipal bonds, spreading exposure across hundreds of holdings with top positions in issuers like New York City Transitional Finance Authority and the State of California. Because municipal bond income is generally exempt from federal taxes, SMB may be particularly appealing to investors in higher tax brackets who benefit most from tax-exempt income.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Short-term bond funds occupy a specific role in a portfolio. They are not trying to generate big returns, but to preserve capital, dampen volatility, and produce modest income while interest rate risk stays low. SMB and BSV both do this at low cost, but they serve meaningfully different investors.
BSV blends roughly 70% government bonds with about 25% investment-grade corporates, producing a straightforward taxable income stream. SMB holds over 300 short-term municipal bonds whose income is generally exempt from federal taxes. SMB's stated yield looks lower than BSV's on paper, but for investors in higher tax brackets, the after-tax value of tax-exempt income can close that gap considerably or eliminate it entirely.
BSV charges less and is backed by roughly $44 billion in assets compared to SMB's $305 million, giving it far greater scale and liquidity. For investors in lower tax brackets, BSV's broader mix and lower cost make it the more practical choice. For those in higher brackets, SMB's tax advantage deserves serious consideration.
Should you buy stock in Vanguard Bond Index Funds - Vanguard Short-Term Bond ETF right now?
Before you buy stock in Vanguard Bond Index Funds - Vanguard Short-Term Bond ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard Bond Index Funds - Vanguard Short-Term Bond ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $581,304!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,215,992!*
Now, it’s worth noting Stock Advisor’s total average return is 1,016% — a market-crushing outperformance compared to 197% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of April 17, 2026.
Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Bond Index Funds - Vanguard Short-Term Bond ETF. The Motley Fool has a disclosure policy.
Recommended Articles
