Bond prices have been in a sea of red, but it's presented an opportunity for bargain hunters looking for value in parts of the debt market. With that, Vanguard has three funds to consider.
Whether it's total bond exposure or more targeted durations, Vanguard has options for the fixed income investor to suit the current market environment. That said, it's a challenging one given the rising tide of inflation and the expectation of more rate hikes by the Federal Reserve.
For aggregate exposure in the corporate debt market, investors can look to the Vanguard Total Corporate Bond ETF ETF Shares (VTC). The fund seeks to track the performance of a broad, market-weighted corporate bond index.
The fund is a fund of funds, and employs an indexing investment approach designed to track the performance of the Bloomberg U.S. Corporate Bond Index, which measures the investment-grade, fixed-rate, taxable corporate bond market.
The index includes U.S. dollar-denominated securities that are publicly issued by industrial, utility, and financial issuers. The fund comes with a low expense ratio of 0.05%.
Targeted Exposure to Short- and Intermediate-Term Duration
To minimize rate risk, investors can opt for a short duration using the Vanguard Short-Term Treasury ETF (VGSH). It’s an ideal option, given the uncertainty in the current market environment where inflation is rampant.
“This ETF offers exposure to short-term government bonds, focusing on Treasury bonds that mature in one to three years,” an ETF Database analysis suggests. “As such, interest rate exposure for this product will be towards the low end, giving VGSH safe haven appeal as an asset that avoids both credit risk and interest rate risk.”
- Seeks to provide current income with modest price fluctuation.
- Invests primarily in high-quality (investment-grade) U.S. Treasury bonds.
- Maintains a dollar-weighted average maturity of one to three years.
For more yield, investors can opt for debt with longer maturities using the Vanguard Interim-Term Corporate Bond ETF (VCIT). VCIT seeks to track the performance of a market-weighted corporate bond index with an intermediate-term dollar-weighted average maturity.
The fund employs an indexing investment approach designed to track the performance of the Bloomberg Barclays U.S. 5–10 Year Corporate Bond Index, which includes U.S. dollar-denominated, investment-grade, fixed-rate, taxable securities issued by industrial, utility, and financial companies, with maturities between five and 10 years.
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