One looking to diversify their portfolio with bonds should look no further than Vanguard and their suite of bond funds. This post will highlight the best Vanguard bond funds available to invest in today. These three Vanguard Bond Funds Reviews should point you in the right direction when looking to invest in bonds in hopes to obtain a diversified portfolio.
Vanguard Long-Term Bond Fund (VBLTX)
The Vanguard Long-Term bond fund is definitely one of the best Vanguard bonds funds available. This bond fund seeks to track the performance of a market-weighted bond index with a long-term dollar-weighted average maturity.
The VBLTX employs an indexing approach designed to track the Barclays U.S. Long Government/Credit Float Adjusted Index which includes:
- Government bonds
- Investment-grade corporate bonds
- Investment-grade international dollar-denominated bonds
- Maturities greater than 10 years and publicly issued
Historical Performance of The Vanguard Long-Term Bond Fund
Historically, the Vanguard long-term bond fund has performed excellent. The fund has returned 12.91 percent over the past year, 4.55 percent over the past three years, 7.89 percent over the past five years, and 6.96 percent over the past decade.
Fees Associated with The Vanguard Long-Term Bond Fund
Fees are Below Average compared to funds in the same category. Vanguard Long-Term Bond Fund has an expense ratio of 0.20 percent. This is one of the most attractive things with any Vanguard fund – the low fees. Fees tend to eat-up your gains and inhibit growth. Vanguard mutual funds are known through the investment world as some of the best, highest quality funds with low management fees. This is what makes Vanguard the biggest mutual fund company in the world.
Vanguard Short-Term Bond Index Fund Investor Shares (VBISX)
If you’re looking for something a bit lower risk (with a lower reward), but still want gains higher than a savings account or CD, the Vanguard short term bond index fund may be perfect for you. This is one of the best vanguard bond funds for safety and security of principal.
This index fund offers a low-cost, diversified approach to Vanguard bond investing, providing broad exposure to U.S. investment-grade bonds with maturities from one to five years.
Emerging Markets Government Bond Index Admiral Shares (VGAVX)
While we are looking to mitigate risk by investing in stocks and Bonds, we also need to ensure our bond portfolio is well diversified. For that reason, we’re highlighting the Emerging Markets Government Bond Index (VGAVX). This bond fund will limit our exposure to the U.S. bond market and get us into the emerging markets.
This fund is designed to provide exposure to the emerging markets portion of the international bond market. The fund seeks to track the performance of an index that provides exposure to government bonds in emerging economies.
This fund is subject to interest rate risk along with emerging market risk both of which could lower the rate of return on the fund.
Vanguard’s approach to bond indexing
Vanguard has been a leader in index-based investment strategies for more than three decades.
Bond indexing has grown tremendously at Vanguard in the past few years. Vanguard manages over 5 Billion in the fixed-income arena.
The funds are managed used a sampling technique and funds are managed against certain benchmarks. The main differentiating factor is experience and exposure. Vanguard also has a deep credit research and risk analysis team that helps them make great decisions for the bond funds.
Vanguard bonds offer income and stability
Higher Potential For Income
Bond mutual funds allow your portfolio to earn income. Money market funds that are designed to protect your cash and stock funds which aim for long-term growth, a bond fund will actually earn you income!
Stabilize Your Portfolio With Vanguard Bond Funds
Using bond mutual funds in your portfolio will add overall balance and help mitigate the risks associated with owning stock funds
Diversify To Avoid Unnecessary Risk
Vanguard bond funds hold hundreds and sometimes thousands of bonds in a single fund. This type of diversification helps you lower your risk by not being exposed to individual bonds.