The VanEck Short Muni ETF (NYSEMKT:SMB) and the Vanguard Short-Term Treasury ETF (NASDAQ:VGSH) both offer low-cost, short-duration bond exposure. However, VGSH offers a higher yield, while SMB pays a lower yield but with tax advantages from municipal bonds.
Both funds aim to deliver safe income by investing in high-quality, short-term bonds. VGSH sticks to U.S. Treasury debt, prioritizing safety and liquidity, while SMB holds a diversified mix of short-term municipal bonds, appealing to those seeking tax-exempt income. This comparison highlights key differences in cost, returns, risk, and portfolio construction for investors considering these two options.
Metric | VGSH | SMB |
|---|---|---|
Issuer | Vanguard | VanEck |
Expense ratio | 0.03% | 0.07% |
1-yr return (as of 2026-03-24) | 3.77% | 3.44% |
Dividend yield | 3.96% | 2.69% |
Beta | 0.25 | 0.34 |
AUM | $32 billion | $303 million |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months.
SMB charges a slightly higher expense ratio than VGSH, making VGSH the more affordable option. However, VGSH also offers a higher trailing yield, which may appeal to investors prioritizing current income over potential tax savings from municipal bonds.
Metric | VGSH | SMB |
|---|---|---|
Max drawdown (5 y) | (5.7%) | (7.5%) |
Growth of $1,000 over 5 years | $1,090 | $1,058 |
SMB tracks a portfolio of 330 short-term, investment-grade, tax-exempt municipal bonds, maintaining a focus on cash-equivalent and very short-duration debt. The fund’s largest holdings are California Community Choice Financing A, New York City Transitional Finance Auth, and State of California. With an 18-year track record, SMB may appeal to those seeking diversification across many issuers and potentially lower tax liability, depending on individual circumstances.
VGSH, in contrast, currently holds 91 U.S. Treasury securities, offering exposure exclusively to government-backed bonds and virtually eliminating credit risk. The fund’s largest positions are United States Treasury Note/Bond issues with varying maturities, and its portfolio is designed for maximum liquidity and stability. Unlike SMB, VGSH does not provide tax-exempt income, but its simplicity and scale may suit those seeking straightforward access to the short-term Treasury market.
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Investors looking for a solid short-term bond fund have solid options in SMB and VGSH. Vanguard is known for offering straightforward, low-cost funds, and VGSH certainly fits the bill. Its ultra-low expense ratio and massive size, with over $32 billion in net assets, will appeal to investors who care about liquidity and maximizing returns at minimal costs.
