BSV Offers Bigger Yield and Lower Costs Than SMB
Key Points
BSV charges a lower expense ratio and offers a higher yield than SMB.
BSV is larger and more liquid than SMB.
Both funds are low-volatility, short-duration bond ETFs with similar recent returns and sector exposures.
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The Vanguard Short-Term Bond ETF (NYSEMKT:BSV) stands out for its lower expense ratio, higher yield, and immense assets under management compared to the VanEck Short Muni ETF (NYSEMKT:SMB), while both funds maintain ultra-low volatility and focus on short-duration bonds.
Both SMB and BSV target short-term fixed-income exposure, but take different approaches: SMB invests in U.S. tax-exempt municipal bonds, while BSV spans a broad swath of investment-grade U.S. government and corporate debt. This comparison examines cost, yield, performance, risk, and portfolio composition to help investors weigh which ETF best suits their needs.
Snapshot (cost & size)
| Metric | SMB | BSV |
|---|---|---|
| Issuer | VanEck | Vanguard |
| Expense ratio | 0.07% | 0.03% |
| 1-yr return (as of 2026-01-30) | 1.4% | 1.7% |
| Dividend yield | 2.6% | 3.8% |
| AUM | $302.6 million | $68.2 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.
BSV appears more affordable, with a lower expense ratio, and delivers a higher yield, which could appeal to cost-conscious investors seeking a more substantial payout from short-term bonds.
Performance & risk comparison
| Metric | SMB | BSV |
|---|---|---|
| Max drawdown (5 y) | -7.42% | -8.53% |
| Growth of $1,000 over 5 years | $959 | $954 |
What's inside
BSV tracks a short-term government and investment-grade bond index, holding 3,115 bonds as of now and maintaining an average effective maturity of 2.8 years. Its top holdings are U.S. Treasury securities, such as United States Treasury Note/Bond 3.63% 12/31/2030 (1.18%), and the fund invests exclusively in cash and other fixed income. There are no notable fund quirks, and the next ex-dividend date is Feb. 2, 2026.
SMB, by contrast, focuses on short-term, tax-exempt municipal bonds, reflected in its 100% allocation to cash and related instruments. Top positions include California Community Choice Financing A (1.68%), State of California (1.10%), and Commonwealth of Massachusetts (1.02%), with a broad portfolio of 334 holdings. Unlike BSV, SMB’s yield is federally tax-free, which may be appealing for taxable accounts.
For more guidance on ETF investing, check out the complete guide at this link.
What this means for investors
In the long run, both funds are solid choices. But the Vanguard Short-Term Bond ETF (BSV) stands out for its costs, returns, and diversification. Its lower expense ratio means that investors will pay roughly half the fees over time as with the VanEck Short Muni ETF (SMB).
The lower cost of BSV is even better given that it has delivered superior total returns to investors. Over the last three years, BSV returned 14.6%, beating SMB by 4.9 percentage points.
While SMB offers tax-free income, BSV’s higher yield and return history still make it an attractive alternative. Even for an investor who pays a high tax rate on income, BSV would still look like the better choice given its large number of bond holdings and lower expense ratio.
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John Ballard 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.
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