VGSH vs ISTB: Yield and Risk Trade-Offs in Bond ETFs
The iShares Core 1-5 Year USD Bond ETF offers a 4.3% yield, exceeding the 3.8% payout of the Vanguard Short-Term Treasury ETF. This income advantage comes with higher credit exposure and volatility, creating a distinct trade-off for conservative investors.
The iShares Core 1-5 Year USD Bond ETF delivers a 4.3% dividend yield. This figure exceeds the 3.8% yield from the Vanguard Short-Term Treasury ETF by 0.5 percentage points. The higher payout stems from the iShares fund's inclusion of corporate and mortgage-backed securities. The Vanguard fund holds only U.S. Treasury debt. This structural difference drives the yield gap between the two instruments.
Cost and Scale Differ Significantly
Vanguard charges an expense ratio of 0.03%. iShares charges 0.06% for its broader mandate. The Vanguard fund manages $39.3 billion in assets. The iShares fund manages $5.1 billion. According to GN auto markets/bonds: bond market data, these figures reflect the scale of each issuer's short-duration offerings. The lower cost of the Vanguard fund makes it the more affordable option for passive income seekers.
Risk Profiles Show Clear Divergence
The iShares fund recorded a 9.3% maximum drawdown over five years. The Vanguard fund's drawdown was 5.7% over the same period. The iShares fund holds 7,451 positions across various credit types. It includes corporate bonds and government-related securities. The Vanguard fund holds 92 issues strictly within the Treasury sector. This concentration limits exposure to corporate credit cycles.
Total Returns Remain Modest
A $1,000 investment in the Vanguard fund grew to $1,097 over five years. The iShares fund grew the same amount to $1,093. Both funds delivered positive total returns including reinvested interest. Without reinvestment, both funds show negative price appreciation over the last year. The iShares fund paid $2.06 per share in dividends over the trailing twelve months. The Vanguard fund paid $2.19 per share in the same period.
