Which Bond ETF Is the Better Buy: Vanguard’s Total Bond Market BND or iShares’ Corporate IGIB?

Vanguard Total Bond Market ETF (NASDAQ:BND) offers broad-spectrum domestic bond exposure at an ultra-low cost, while iShares 5-10 Year Investment Grade Corporate Bond ETF (NASDAQ:IGIB) provides a more targeted, higher-yielding play on intermediate-term corporate debt.

These two fixed-income stalwarts serve different roles in a diversified portfolio. While both seek to provide steady income and price stability, BND casts a wide net to include government and corporate bonds. In contrast, IGIB focuses exclusively on the corporate sector, specifically targeting the intermediate five- to 10-year maturity range.

Snapshot (cost & size)

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.

Both funds are remarkably affordable, though Vanguard Total Bond Market ETF carries a slightly lower 0.03% expense ratio. The primary differentiator for income seekers is the yield; iShares 5-10 Year Investment Grade Corporate Bond ETF offers a 5.1% trailing yield.

Performance & risk comparison

What's inside

Vanguard Total Bond Market ETF provides extensive exposure to the U.S. domestic, taxable, investment-grade fixed-income market, excluding inflation-protected or tax-exempt bonds. This fixed income fund tracks a market-capitalization-weighted index and aims for consistent income with relatively modest fluctuations. It is highly diversified with around 15,000 holdings, where its largest positions include government and corporate issues that each account for no more than 0.41% of the portfolio. The fund launched in 2007. Vanguard Total Bond Market ETF has paid $2.95 per share over the trailing 12 months, which on its recent ~$71.13 share price works out to a 4.2% yield.

iShares 5-10 Year Investment Grade Corporate Bond ETF targets high-quality corporate debt securities denominated in U.S. dollars. This fixed income fund specifically selects securities with maturities ranging from five to 10 years, offering a more concentrated focus than its peer. The portfolio is diversified across more than 3,000 positions, and its top holdings include various investment-grade corporate bonds where no single position exceeds 0.22% of the fund assets. It launched in 2007. iShares 5-10 Year Investment Grade Corporate Bond ETF has paid $2.60 per share over the trailing 12 months, which on its recent ~$51.01 share price works out to a 5.1% yield.

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Which looks like the better buy

I'd go with the Vanguard Total Bond Market ETF (BND), because bonds have had a bumpy year and BND is built to smooth out the ride. The Federal Reserve raised interest rates again in September, and corporate bonds lost ground in the third quarter. About two-thirds of BND is U.S. government bonds, which gives it a cushion that a corporate-only fund doesn't have. That makes it a good fit if you want bonds to be the calm part of your portfolio.

IGIB owns only corporate bonds, so it pays a higher yield, but it also fell further than BND at its worst over the past five years. BND holds around 15,000 bonds and charges just 0.03%, a hair less than IGIB, so you get the steadier mix without paying extra for it.

IGIB is a fine choice if you want more income and can handle bigger swings. For most long-term investors, though, BND is the easier bond fund to hold through a rough stretch.

Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Total Bond Market ETF. The Motley Fool has a disclosure policy.