Vanguard BND beats Fidelity FIGB on cost and diversification

Vanguard Total Bond Market ETF (BND) costs less and holds more securities than Fidelity Investment Grade Bond ETF (FIGB), making it the stronger choice for investors prioritizing low fees and broad exposure. The two funds both provide core fixed income exposure, but they differ significantly in scale, cost, and portfolio breadth.

The most distinct difference is the expense ratio. Vanguard charges 0.03% annually, while Fidelity charges 0.36%. This 0.33 percentage point gap means an investor in BND pays roughly one-tenth of what a FIGB investor pays in annual fees. For long-term holders, this cost savings can outweigh small differences in yield or performance.

Yield figures are nearly identical. BND has a trailing-12-month distribution yield of 4.1%, based on $2.93 in dividends per share against a recent price of approximately $71.20. FIGB has a slightly higher yield of 4.2%, based on $1.74 in dividends per share against a recent price of approximately $41.62. The difference in yield is minor compared to the significant gap in operating costs.

Diversification favors Vanguard by a wide margin. BND holds 11,421 securities, with no single position exceeding 0.5% of the portfolio. This high level of diversification reduces the impact of any single issuer's performance on the overall fund. In contrast, FIGB holds only 1,036 securities. Its largest positions are more concentrated, including cash at 5.69% of the portfolio, U.S. Treasury notes at 4.27%, and another Treasury position at 3.95%.

The funds have different histories and launch dates. Vanguard launched BND in 2007, giving it a longer track record for analysis. Fidelity launched FIGB in 2021, making it a younger fund with a shorter history of monthly returns available for beta calculation, which measures price volatility relative to the S&P 500.

Despite these structural differences, both funds have delivered almost identical five-year returns. This parity in performance suggests that the broader diversification of BND does not come at the cost of returns relative to the curated selection in FIGB. Instead, it allows BND to achieve similar results at a fraction of the cost.

For investors seeking safety and income from investment-grade debt, the choice often comes down to fee sensitivity and preference for diversification. BND offers a lower-cost, more broadly diversified option, while FIGB provides a slightly higher yield and a more concentrated portfolio of high-quality debt.