Apart from stock, another smart way to withdraw living expenses is by investing in bonds. When you aren’t planning on investing in stocks, one of the time-honored alternatives is bonds.
Bonds play a significant role in investor portfolios and are the best alternative for retirees when the stock markets are in a downturn.
Maybe you’ve considered investing in bonds but you don’t which particular one suits your investment style. We have highlighted in this article the 10 best Vanguard bond funds, some of which are for long-term investment and others short-term.
Table of contents
- What are Bond Funds?
- Best Vanguard Bond Funds
- #1. Intermediate-Term Corporate Bond (CIT)
- #2. Extended Duration Treasury ETF (EDV)
- #3. Long-Term Corporate Bond ETF (CLT)
- #4. Mega Cap Growth ETF (MGK)
- #5. Tax-Exempt Bond ETF (TEB)
- #6. Mortgage-Backed Securities ETF (MBS)
- #7. Long-Term Treasury ETF (GLT)
- #8. Vanguard LifeStrategy Income Fund (VASIX)
- #9. Short-Term Corporate Bond ETF (VCSH)
- #10. Vanguard Intermediate-Term Bond (VBIIX)
- Conclusion
- References
- Recommendations
What are Bond Funds?
Bond funds are companies that invest majorly in bonds or other types of debt securities to generate monthly income for investors.
Recent data on benzinga.com show that over 30 million investors have registered with Vanguard to accomplish their financial goals. Whether you’re looking to finance a car or buy a new home, Vanguard has the right set of financial resources to help make your dreams a reality.
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Best Vanguard Bond Funds
Below is a list of highly recommended vanguard bond funds for investors arranged in no particular order. You can choose the right funds for your needs.
- Intermediate-Term Corporate Bond (CIT)
- Extended Duration Treasury ETF (EDV)
- Long-Term Corporate Bond ETF (CLT)
- Mega Cap Growth ETF (MGK)
- Tax-Exempt Bond ETF (TEB)
- Mortgage-Backed Securities ETF (MBS)
- Long-Term Treasury ETF (GLT)
- Vanguard LifeStrategy Income Fund (VASIX)
- Vanguard Short-Term Corporate Bond ETF (VCSH)
- Vanguard Intermediate-Term Bond (VBIIX)
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#1. Intermediate-Term Corporate Bond (CIT)
Vanguard Intermediate-Term Corporate Bond (VCIT) seeks to provide a moderate and sustainable level of current income. It Invests primarily in high-quality (investment-grade) corporate bonds.
VCIT holds corporate bonds have a moderate interest rate risk, with a dollar-weighted average maturity of 5 to 10 years. The ETF’s average duration is 6.4 years, with effective maturity of 7.5 years.
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#2. Extended Duration Treasury ETF (EDV)
Since 2007, The Vanguard Extended Duration Treasury ETF has been on the market offering exposure to long-dated U.S. treasury bonds. The ETF tracks the Barclays Capital U.S. Treasury STRIPS with maturities ranging from 20 to 30 years.
This ETF is considered one of the best vanguard bond funds for recession. It has an expense ratio of 0.07% and has an annual dividend yield of $4.45 per share. It has a 52-week high of $187.13 and a 52-week low of $125.99.
The Vanguard Extended Duration Treasury ETF has Assets Under Management (AUM) of over $1.6 billion. It has high liquidity and trades over 143,000 shares per day. This ETF has a 1-year return rate of 25.75%, a 3-year return rate of 46.90%, and a 5-year return rate of 60.18%.
#3. Long-Term Corporate Bond ETF (CLT)
VCLT corporate bond has been open to trade since 2009. This ETF offers exposure to investment-grade corporate bonds in the U.S. It tracks the Bloomberg Barclays U.S. Corporate Index. It focuses on bonds with a maturity of 10 to 25 years but, it has an average duration of nearly 15 years.
At about 50%, VCLT has a 52-week high of $112.41 and a 52-week low of $76.45. This ETF has a 1-year return rate of 13.54%, a 3-year return rate of 28.90%, and a 5-year return rate of 54.80%. The Vanguard Long-Term Corporate Bond ETF has an AUM of $5.5 billion. It has high liquidity and has an average daily trade volume of 241,133 shares.
#4. Mega Cap Growth ETF (MGK)
The Vanguard Mega Cap Growth ETF offers exposure to mega-cap companies within the growth sector of the U.S. economy. It tracks the MSCI U.S. Large-Cap Growth Index.
This ETF has an expense ratio of 0.07%, an annual dividend yield of $1.23 per share, a 52-week high of $201.18, and a 52-week low of $107.97.
The liquidity and trades for VMGK is over 260,623 shares per day. At about 43.38% 1-year return rate, an AUM of $9.6 billion, a 3-return rate of 85.19%, and a 5-year return rate of 139.55%.
#5. Tax-Exempt Bond ETF (TEB)
Vanguard Tax-Exempt Bond has been listed in the market since 2015. This ETF is for high-tax-bracket investors. It provides a moderate and sustainable level of current income that is exempt from federal personal income taxes. It is a smart way to reduce your income taxes.
The Tax-Exempt Bond fund has no limitations on the maturity of individual securities but is expected to maintain a dollar-weighted average maturity of 6 to 12 years.
The fund may invest up to 20% of its assets in medium-grade bonds, as determined by a rating organization or by the advisor.
#6. Mortgage-Backed Securities ETF (MBS)
Vanguard Mortgage-Backed Securities ETF (VMBS) seeks to provide a moderate and sustainable level of current income. This ETF tracks the performance of the Bloomberg Barclays U.S. MBS Float Adjusted Index.
It Invests primarily in U.S. agency mortgage-backed pass-through securities issued by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). It has a moderate interest rate risk, with a dollar-weighted average maturity of 3 to 10 years.
#7. Long-Term Treasury ETF (GLT)
The Vanguard Long-Term Treasury ETF offers exposure to long-term U.S. government bonds. This ETF tracks the Bloomberg Barclays U.S. Long Treasury Bond Index and focuses on U.S. treasuries that mature in 10 to 25 years.
This ETF is a recommended vanguard bond fund with an expense ratio of 0.05% and an annual dividend yield of $1.83 per share. It has an AUM of $2.5 billion.
The Vanguard Long-Term Treasury ETF has high liquidity with an average daily trade volume of 361,161 shares. It has a 12-month return rate of 19.16%, a 3-year return rate of 34.87%, and a 5-year return rate of 46.46%. This ETF has a 52-week high of $108.47 and a 52-week low of $80.97.
#8. Vanguard LifeStrategy Income Fund (VASIX)
VASIX Funds is one of the highly recommended Vanguard bond funds available. According to vanguard .com, LifeStrategy Income Fund is a series of broadly diversified, low-cost funds with an all-index, fixed-allocation approach that may provide a complete portfolio in a single fund.
This most conservative ETF seeks to provide current income and some capital appreciation. The fund holds 80% of its assets in bonds, a portion of which is allocated to international bonds, and 20% in stocks, a portion of which is allocated to international stocks. Investors with a short- to medium-term time horizon who can accept modest movement in share price may wish to consider this fund.
#9. Short-Term Corporate Bond ETF (VCSH)
Vanguard Short-Term Corporate Bond ETF is a low-cost index fund that seeks to track the performance of a market-weighted corporate bond index with a short-term dollar-weighted average maturity.
This ETF tracks the performance of the Bloomberg Barclays U.S., investment-grade, fixed-rate, taxable bonds issued by industrial, utility, and financial companies, with maturities between 1 and 5 years.
VCSH fund changes in interest rates which is perilous and can lead to a decrease in income for the fund. However, it is one of the best vanguard bond funds for Investors with a short-term savings goal who are willing to accept some price movement may wish to consider this fund.
#10. Vanguard Intermediate-Term Bond (VBIIX)
VBIIX offers low-cost, diversified exposure to U.S. investment-grade bonds with maturities from five to 10 years. Its portfolio consists primarily of U.S. government bonds and investment-grade corporate bonds. The fund holds no bonds rated below investment grade.
This fund has assets totaling almost $39.93 billion invested in 2,152 different holdings. Its portfolio consists primarily of U.S. government bonds and investment-grade corporate bonds. The fund holds no bonds rated below investment grade.
Conclusion
Bond funds provide instant diversification for investors for a low required minimum investment. Take advantage of our list of best Vanguard bonds and build wealth for yourself.
References
Recommendations
