# VSB vs XBB



## kyboch (Dec 23, 2011)

Looking at these two bond funds. I want to keep my portfolio of ETFs simple. I just listened to Gordon Pape and he suggested that all you would ever need are four ETFs. Canadian based broad market index, Us based broad market index, EAFE broad market index and a Canadian total bond fund. In my portfolio I'm going to include the BMO Weighted REITS fund as well to further diversify. So in total I would have five asset classes.

I've got the first three covered but have some doubts about the bond fund. 

The Vanguard VSB tracks the Barclays Capital Global Aggregate
Canadian Government/Credit 1–5 year Float Adjusted Bond Index

The Ishares XBB tracks the performance of the DEX Universe Bond Index

VSB MER is .15%
XBB MER is .30%

Which one would you include in your portfolio, or maybe a combination of the two?
My asset allocation is 40% bonds, 50% stocks, 10% REITS.

Thanks and Happy New Year to all.


----------



## slacker (Mar 8, 2010)

VSB and XBB are not comparable products. VSB is much shorter duration. A better comparison would be VAB vs XBB, or VSB vs XSB.

The things to look for in a bond fund is YTM, duration and MER.

VSB:
- 0.15% MER
- 1.43% YTM
- 2.6 year duration

XSB:
- 0.25% MER
- 1.42% YTM
- 2.63 year duration

VAB:
- 0.2% MER
- 2.33% YTM
- 6.6 year duration

XBB:
- 0.3% MER
- 2.28% YTM
- 6.69 year duration

As you can see, they're about comparable. Either iShares or Vanguard will do what you need it to do. I would personally go with Vanguard, because I like to vote with my money and always choose a lower cost provider. But it's not a significant difference.


----------



## uptoolate (Oct 9, 2011)

Thanks for the breakdown Slacker. I hold iShares ETFs currently but new money will be going to Vanguard.


----------



## kyboch (Dec 23, 2011)

Slacker thankyou for explaining the bond funds and what to look for. I hear a lot of talk about real return bonds what do you know about them?


----------



## slacker (Mar 8, 2010)

I don't know anything about them.

The total return (dividend + price) was 13.89% for XRB last year. That sounds nice.


----------



## CanadianCapitalist (Mar 31, 2009)

As slacker explained, VSB is a short-term bond fund. Since it has a much shorter duration than a medium term fund such as XBB or VAB, the price will fluctuate much more when interest rates change. 

The decision between VSB/XSB or VAB/XBB is a tough one. One school of thought holds that the slightly higher historical returns of longer bond terms is not worth the much higher risk (defined as volatility). Another school holds that the lower correlation between longer term bonds and stocks makes VAB/XBB more attractive for diversification purposes. 

For RRBs check out this excellent resource:

http://bylo.org/rrbs.html

There are a few ETFs that track this asset class.


----------



## gibor365 (Apr 1, 2011)

Andrew Hallam , Millionaire Teacher Sells $80,000 Of Stock Indexes VTI and VEA and buying VSB
http://andrewhallam.com/2013/11/millionaire-teacher-sells-80000-of-stock-indexes/

Just checked YTM of VSB is just 1.6%, even less than HISA....


----------

