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.
NYSEMKT: SMB
Key Data Points
Snapshot (cost & size)
| 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.
Performance & risk comparison
| Metric | VGSH | SMB |
|---|---|---|
| Max drawdown (5 y) | (5.7%) | (7.5%) |
| Growth of $1,000 over 5 years | $1,090 | $1,058 |
What's inside
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.
NASDAQ: VGSH
Key Data Points
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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What this means for investors
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.
However, investors in higher tax brackets may find SMB a simpler option due to its tax-free income. The higher yield from VGSH may not be an advantage for those who pay higher tax rates.
Overall, VGSH is a more solid bond fund for most investors. Its greater asset size may lead to tighter spreads for trading, tilting the cost advantage more in its favor. Moreover, its 100% focus on U.S. Treasuries makes it a safer option than local and state issues.
