Vanguard Bond Funds
Vanguard Bond Funds
— While equity ETFs have flourished recently, the fixed-income segment
still hasn't exactly caught on. Of well over 500 listed ETFs, less than
two dozen are tied to the bond market — representing a tiny sliver of
overall assets.
This discrepancy is partially due to liquidity issues, particularly for municipal and emerging market debt. At the same time, bond funds also carry lower expense ratios, which means they are less profitable for the companies that issue them. However, fixed-income investors now have more choices than ever before, thanks in part to a recent flurry of product launches from Vanguard, the pioneer of low-cost index investing.
Vanguard Short-Term Bond (AMEX: BSV, $74.69)
Vanguard Intermediate-Term Bond (AMEX: BIV, $73.64)
Vanguard Long-Term Bond (AMEX: BLV, $72.91)
Vanguard Total Bond Market (AMEX: BND, $74.04)
These funds are rather self-explanatory, and offer investors exposure to government and investment-grade corporate debt of varying duration — with rock-bottom annual expenses of just 0.11%.
Our View —> Over the long haul, the performance margin between a great bond fund and a mediocre one can be rather thin, so investors should be particularly cognizant of expenses here. And on that front, very few fund companies can compete with Vanguard.
Technically just different share classes of Vanguard's existing bond funds, these ETFs could anchor the domestic investment-grade portion of a well-rounded fixed-income portfolio. BND, for example, holds a staggering 3,000 bonds, which should provide ample diversification and minimal tracking error against the fund's benchmark — the Lehman Brothers Aggregate Bond Index.
With this in mind, we plan to add shares of the Vanguard Total Bond Market Fund (AMEX: BND) to our "Buy-and-Hold" Portfolio at the opening bell on Tuesday, July 3rd.
As a reminder, brokerage commissions are typically built into the offering price of a new closed-end fund, so most new funds begin trading at a premium. In many cases, the share price will soon retreat back towards the NAV, so it is usually advantageous to wait a few weeks before purchasing a new closed-end fund.
This discrepancy is partially due to liquidity issues, particularly for municipal and emerging market debt. At the same time, bond funds also carry lower expense ratios, which means they are less profitable for the companies that issue them. However, fixed-income investors now have more choices than ever before, thanks in part to a recent flurry of product launches from Vanguard, the pioneer of low-cost index investing.
Vanguard Short-Term Bond (AMEX: BSV, $74.69)
Vanguard Intermediate-Term Bond (AMEX: BIV, $73.64)
Vanguard Long-Term Bond (AMEX: BLV, $72.91)
Vanguard Total Bond Market (AMEX: BND, $74.04)
These funds are rather self-explanatory, and offer investors exposure to government and investment-grade corporate debt of varying duration — with rock-bottom annual expenses of just 0.11%.
Our View —> Over the long haul, the performance margin between a great bond fund and a mediocre one can be rather thin, so investors should be particularly cognizant of expenses here. And on that front, very few fund companies can compete with Vanguard.
Technically just different share classes of Vanguard's existing bond funds, these ETFs could anchor the domestic investment-grade portion of a well-rounded fixed-income portfolio. BND, for example, holds a staggering 3,000 bonds, which should provide ample diversification and minimal tracking error against the fund's benchmark — the Lehman Brothers Aggregate Bond Index.
With this in mind, we plan to add shares of the Vanguard Total Bond Market Fund (AMEX: BND) to our "Buy-and-Hold" Portfolio at the opening bell on Tuesday, July 3rd.
As a reminder, brokerage commissions are typically built into the offering price of a new closed-end fund, so most new funds begin trading at a premium. In many cases, the share price will soon retreat back towards the NAV, so it is usually advantageous to wait a few weeks before purchasing a new closed-end fund.
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