BND Offers Broader Bond Mix Than VGIT
Key Points
BND holds a much broader mix of investment-grade bonds than VGIT, which sticks to intermediate U.S. Treasuries.
Both funds offer identical ultra-low costs and nearly the same yield, but BND’s larger asset base is significantly higher than VGIT's.
VGIT has weathered smaller drawdowns in recent years, while both funds have delivered almost identical returns.
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Vanguard Total Bond Market ETF (NASDAQ:BND) covers a far wider slice of the U.S. bond universe than Vanguard Intermediate-Term Treasury ETF (NASDAQ:VGIT). Still, both keep expenses low and deliver similar yields, making the real difference about breadth versus focus.
Both BND and VGIT are low-cost bond funds from Vanguard designed for income and portfolio ballast, but their approaches differ: BND gives investors diversified exposure across the entire investment-grade U.S. bond market, while VGIT focuses solely on intermediate-term Treasuries. This comparison examines cost, performance, risk, and what’s inside to help investors weigh which approach best suits their needs.
Snapshot (cost & size)
| Metric | VGIT | BND |
|---|---|---|
| Issuer | Vanguard | Vanguard |
| Expense ratio | 0.03% | 0.03% |
| 1-yr return (as of 2026-02-04) | 2.5% | 2.3% |
| Dividend yield | 3.9% | 4.2% |
| Beta | 0.82 | 0.98 |
| AUM | $44.6 billion | $384.8 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-year return represents total return over the trailing 12 months.
There is no meaningful cost gap here: both funds charge a rock-bottom 0.03% expense ratio. BND’s yield edges out VGIT by three tenths of a percentage point, offering a slightly higher payout for income-seeking investors.
Performance & risk comparison
| Metric | VGIT | BND |
|---|---|---|
| Max drawdown (5 y) | -14.77% | -17.29% |
| Growth of $1,000 over 5 years | $998 | $994 |
What's inside
BND casts a wide net, holding 11,444 different bonds spanning the U.S. investment-grade market, with an average effective maturity of eight years. Nearly half (49.2%) of its portfolio is comprised of Treasury bonds, with 19.5% in government mortgage-backed securities, and 14.5% in industrial bonds, reflecting its diversified approach. There are no notable quirks or hidden tilts, making it a straightforward core bond holding.
VGIT, by contrast, sticks to intermediate-term U.S. Treasuries, which comprise nearly its entire portfolio, with top holdings like United States Treasury Note/Bond 4.38% 05/15/2034 2.00% and similar issues. This concentrated focus may appeal to those seeking maximum safety from credit risk, but it sacrifices the broader sector and credit exposure found in BND.
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What this means for investors
BND offers several key advantages for an income investor over VGIT. Its high diversification across the bond market doesn’t sacrifice returns. BND owns over 11,000 positions, compared to VGIT’s 102 positions, yet both ETFs have delivered almost identical returns over the past five years.
Another reason BND seems like a no-brainer is that it offers a slightly higher yield. Its current yield is 4.2%, somewhat higher than VGIT’s 3.9%.
BND’s higher yield is attractive for a less apparent reason. BND’s positions have an average duration of 5.7 years, compared to 4.9 years for VGIT. The longer duration of BND’s portfolio means less sensitivity to sudden changes in interest rates.
The only apparent advantage to VGIT is a recent history of lower drawdowns and less volatility, as measured by its beta. However, if interest rates fall in 2026, BND could offer higher upside. The additional bonus of a higher starting yield and broader diversification makes it a compelling choice compared to VGIT for investors seeking a quality bond ETF.
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John Ballard 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.
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