Top 18 Vanguard Bond ETFs to Buy

Vanguard bonds ETF

A bond ETF, similar to stock ETFs, is a pooled investment fund primarily investing in bonds. They invest based on bond market indexes like Bloomberg Barclays Global Aggregate Bond Index, Citi World Broad Investment-Grade Bond Index, and Citi World Government Bond Index. Like a mutual fund, bond exchange-traded funds(ETFs) are tradable on major stock exchanges in the US.

Bond ETFs are liquid and transparent investment securities as they are public-listed. Due to disclosure requirements, unlike real estate, bond ETFs reflect their values quickly and timely according to changes in the economy and the company’s credit situations.

Bond ETFs invest mainly in Government Treasuries and corporate fixed-income securities. Investors can gain access to different types of bonds with different yields and maturities. More than that, as bond ETFs are passively-invested funds, the cost is lower than other bond mutual funds.

 

Understanding Bond ETFs

Bond ETFs offer many benefits individual bonds don’t. Let’s take a look at them in detail:

  • Coupon/Interest payments

Most bonds pay interest or coupons regularly, mostly on a six-month schedule. However, bond ETFs, due to structure design, can pay coupons monthly. An example is: Vanguard Total Bond Market ETF(BND) has 10,025 bonds in its portfolio. The fund has a wide range of respective coupon payment dates. Therefore it can pay interest more frequently to bond investors than general bonds.

  • Liquidity

Liquidity is one of the problems a bond investor faces in their investment portfolios. As a denomination of $1,000 for a bond is a minimum requirement for investing in bonds, bondholders may find it difficult to sell out in a short time. Besides, the pricing information is not always accurate due to low market liquidity.

Like stocks, bond ETFs trade all day, and updated price quotes are always available in exchanges. Investors can track the updated pricing information whether they intend to sell or buy.

 

Pros and Cons

You may want to hold bonds in your investment portfolio; however, you should know some benefits and drawbacks of investing in Bond ETFs before making any decisions.

1. Diversification(Pros)

Investors in a bond ETF hold a stake in a fund owning thousands of bonds in markets. For example, suppose you buy a unit of the Vanguard Total International Bond ETF(BNDX). In that case, you have already held a part of 6,323 bonds across North America, Europe, Japan held in the portfolio. Diversification reduces the risk enormously because you hold many bonds simultaneously.

2. Buy bond ETFs online(Pros)

It is never much more convenient than ever to buy bonds ETFs online. Open an account on brokerages’ official websites like TD Ameritrade, Fidelity, Interactive Brokers, and trade to easily buy or sell funds. But beware that there is a commission charged to you through some of the brokers. You should check before doing it.

3. Maturity(Cons)

No maturity dates are available for bonds within ETFs. As an ETF fund holds bonds with multiple maturities, it is not practical to redeem the bonds simultaneously for principals in a short time. They can, however, sell units of the bond ETF they invested in earlier. 

4. Interest Rate Risk(Cons)

As mentioned earlier, bond ETF investors do not own the bonds themselves. They buy units of a bond ETF. When the interest rate rises, the bond prices fall. Investors cannot do anything to stop the fall of the bond value except for selling their stakes.

 

Bond ETFs vs. Bond Mutual Funds

You should beware of the advantages and disadvantages of both types of funds.

  • Investment objectives: If you want to increase bond fund investing returns, bond mutual funds may be the right choice. They belong to active-managed funds seeking higher returns. But you should note the risks are higher than bond ETFs. 

Though being passive-managed funds, bond ETFs are suitable for do-it-yourselves investors. ETF investors can make frequent trading within business hours as ETFs can be traded in full business hours while bond mutual funds have one price quote only in a day.

  • Bond buy-back: As there are no maturities for bond ETFs, bond ETFs may find it hard to redeem the bonds and get back full principals for investors. However, bond mutual funds may repurchase them from investors.

 

Bond ETFs vs. Bond Ladder

Bond Ladder is buying bonds with different maturities and reinvesting with the proceeds upon maturities. The purpose is to 1. increase income, 2. reduce interest rate risk, credit risk, and liquidity risk.

  • Regarding income, bond ETFs have the flexibility of paying monthly and do not require the effort of re-designing bond laddering strategies over and over again.
  • In terms of interest rate risk, a bond ladder may have more reinvesting protection than a bond ETF. 

However, a bond ladder may face credit risk when investors choose smaller companies with smaller bonds using a bond ladder. Bond ETFs buy bonds from larger companies and Governments within the indexes and reduce the credit risks.

Furthermore, a bond ladder should match the bond maturities in the portfolio so they can provide liquidity. The price quotes of bond ETFs are on-screen on the exchanges and tradable all day. They both have the risk of getting full principals back upon maturity.

 

Things to Consider Before Getting a Bond ETF

Before investing in a bond ETF, you should consider several things:

  • Think long term

You should know a bond ETF is a mid-to-long-term investment with stable income streams. Income takes priority over capital appreciation. If you think otherwise, you may suffer from the loss.

  • What is the best Vanguard bond ETF?

Vanguard is one of the prestigious bond investing companies. The Vanguard Total Bond Market ETF(BND) invests in the US Federal Government bonds (more than 60%) and investment-grade corporate bonds (the remaining). It almost eliminates the credit risk!

Furthermore, it holds more than 10,000 bonds and diversifies significant risks.

  • What are the best bond ETFs?

Apart from two Vanguard bond ETFs, some best-run funds are low-cost and offer stable income. They are suitable for being a part of your portfolio:

  1. iShare Core US Aggregate Bond ETF(AGG)
  2. iShares Core Total USD Bond Market ETF(IUSB)
  3. iShares U.S. Treasury Bond ETF(GOVT)
  4. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF(BIL)
  5. PIMCO Enhanced Short Maturity Active ETF(MINT)
  6. DoubleLine Total Return Bond Fund Class N(DLTNX)
  7. BlackRock Strategic Income Opportunities Investor A(BASIX)
  8. Vanguard Core Bond Fund Investor(VCORX)
  9. Vanguard Long-Term Bond ETF(BLV)
  10. Vanguard Intermediate-Term Bond ETF(BIV)
  11. Vanguard Short-Term Corporate Bond Index Fund ETF(VCSH)
  12. Vanguard Total Bond Market ETF(BND)

These are some of the best bond ETFs available for investors to consider. You should consult a financial professional before making any decision.

  • Does Vanguard have a high yield bond ETF?

No, Vanguard does not offer high yield bond ETFs but has a high yield bond mutual fund. The company thinks such a type of bond ETFs is not fit for conservative investors.

  • Are bond ETFs a good investment?

Beforehand, you should consider your investment strategy: If you intend to invest in bond funds, you should look at two options: bond ETFs and bond mutual funds. You may like bond ETFs if you are a frequent trader, as bond ETFs are tradable all-time on the exchanges. You should invest in bond mutual funds if you are worried about finding buyers for ETFs as the mutual fund can repurchase your stakes back.

 

List of all Vanguard Bond ETFs

Here is a list of main Vanguard bond ETFs currently offered:

Name Ticker Asset Class Expense Ratio Investment Objectives
Extended Duration Treasury ETF EDV Bond – Long-term Treasury 0.07% Broad exposure to long-term Treasury STRIPS market; Provide steady income with high credit quality.
Intermediate-Term Bond ETF BIV Bond – Inter-term Treasury 0.05% Exposure to 5-10 year bonds with US Government and Corporate bonds of investment-grade, also to international dollar-denominated bonds.
Intermediate-Term Treasury ETF VGIT Bond – Inter-term Government 0.05% Invest primarily in the US Treasury bonds.
Long-Term Bond ETF BLV Bond – Long-term Investment 0.05% Diversified exposure to the long-term, investment-grade U.S. bond market.
Long-Term Treasury ETF VGLT Bond – Long-term Government 0.05% Invests primarily in U.S. Treasury bonds and Maintains a dollar-weighted average maturity of 10 to 25 years.
Mortgage-backed Securities ETF VMBS Bond – Inter-term Government 0.05% Invest primarily in U.S. agency mortgage-backed pass-through securities issued by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).
Vanguard Short-Term ETF BSV Bond – Short-term Investment 0.05% Invests in U.S. government, high-quality (investment-grade) corporate, and investment-grade international dollar-denominated bonds.

 

Short-Term Inflation-Protected Securities ETF VTIP Bond – Short-term Government 0.05% Invests in bonds backed by the full faith and credit of the federal government and whose principal is adjusted semi-annually based on inflation.

Designed to generate returns more closely correlated with realized inflation over the near term

Short-Term Treasury ETF VGSH Bond – Short-term Government 0.05% Invest primarily in high-quality (investment-grade) U.S. Treasury bonds.
Total Bond Market ETF BND Bond – Inter-term Investment 0.035% Provide broad exposure to the taxable investment-grade U.S. dollar-denominated bond market, excluding inflation-protected and tax-exempt bonds.
ESG US Corporate Bond ETF VCEB Bond – Inter-term Investment 0.12% Screened for certain environmental, social, and corporate governance (ESG) criteria.
Intermediate-Term Corporate Bond ETF VCIT Bond – Inter-term Investment 0.05% Invests primarily in high-quality (investment-grade) corporate bonds
Long-Tem Corporate Bond ETF VCLT Bond – Long-term Investment 0.05% Invests primarily in high-quality (investment-grade) corporate bonds
Short-Term Corporate Bond ETF VCSH Bond – Short-term Investment 0.05% Invests primarily in high-quality (investment-grade) corporate bonds
Total Corporate Bond VTC Bond – Inter-term Investment 0.05% Unique ETF of ETF structure
Tax-Exempt Bond ETF  VTEB Bond – Inter-term National Muni 0.06% provide federal tax-exempt income and can tolerate moderate price and income fluctuations may wish to consider this fund
Total World Bond BNDW International 0.06% Broad, diversified exposure to the global investment-grade bond market
Total International Bond ETF BNDX International 0.08% 1. Employs hedging strategies to protect against uncertainty in exchange rates

2. Provides a convenient way to get broad exposure to non-US dollar-denominated investment-grade bonds

Vanguard Emerging Market Government Bond (higher risk) VWOB International

0.25 (high)

Provides a convenient way to get additional exposure to emerging market government bonds

 

Final Words

The top 18 Vanguard bond ETF fund series offers a wide choice for investors to choose. As you can see, they are low-cost and passively managed funds. They are suitable for conservative investors who want to preserve capital and need steady income regularly or monthly. 

For aggressive investors, they can be a hedge against downfalls of other investments due to market crashes or recession.

Like other ETFs, Vanguard bond ETFs have highly transparent and easy-to-follow portfolios based on mimicking major bond index benchmarks. Therefore, the expense ratio is lower than other bond mutual funds.

The last bond fund in the table above, “Vanguard Emerging Market Government Bond,” is additionally added. Investors willing to take higher risks and returns may like to invest in the fund. It offers exposure to emerging government bonds in return for higher rewards.

Investors intending to buy bonds should consider their objectives. Bond investing is a mid-to-long-term investment. If you choose to favor stable income over capital appreciation, bond investing is an appropriate investment tool and, besides, a hedging tool in your portfolio.

While choosing between a bond ETF and a bond mutual fund, you should clarify whether you will actively and frequently trade. Choose a bond ETF if the answer is yes. Otherwise, take a bond mutual fund if it is No!

And suppose you can afford the effort to restructure a bond portfolio and save management fees by fund managers, and even design your income streams. In that case, the do-it-yourself of a bond ladder is for you, but it lacks diversifications like bond ETFs.

One more thing: You may find individual bonds or ETFs hard to find a buyer; a bond mutual fund may be the best choice because it will buy back the units from you.

No matter what choice you make, information collecting and analysis should be a go-ahead before you act. Investing is the final step of your decision. Investoralist contains a lot of in-depth expert analysis and useful information. You can also find more investment tips and questions and answers to your needs here. 

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What to Look for About Vanguard CD Rates: An Overview

Vanguard CD Rates

Vanguard, a household name, offers multiple financial products like stock investing, mutual funds, and ETFs. You must be aware they also provide Certificates of Deposits(CDs) service. The CDs offered by Vanguard are, to some extent, different from CDs by other financial institutions.

Vanguard offers brokered CDs service to depositors. Brokered CDs are the rates Vanguard buys in from banks and sell out to brokerage customers at very competitive prices. Vanguard makes a profit from the buy-in price and the offer price.

Vanguard buys many rate quotes from various banks across the country, therefore offering attractive CD rates to customers. Investors intending to park their money can find it appealing to deal with Vanguard as it provides a lot of competitive CD rates to various types of clients.

What Are Vanguard CD Rates?

If you think after opening an account with Vanguard, and you can deposit your money into a CD and get things done. You may be disappointed because you may be overwhelmed with what Vanguard has offered a wide range of CD products available for you to choose from.

Before we go further, you have to know a term: APY. APY stands for annual percentage yield. It is the interest earned on the principal in percentage over a year and has compounding effects by earning the interest on additional interest. It seems confusing, but you should not be worried, as the APYs stated have already been calculated and included in the rates.

The best thing about Vanguard CD rates is you can find the best rates through specified parameters. You can even find out the CD rates suitable for you based on your criteria. A current rate table is as follows for your reference:

Vanguard Brokered CDsMinimum Deposits(US)Annual Percentage Yield(APY)
1-3 months10,0000.05%
4-6 months10,0000.05%
7-9 months10,0000.05%
10-12 months10,0000.05%
13-18 months10,0000.05%
3 years10,0000.2%
4 years10,0000.3%
5 years10,0000.45%
7 years10,0000.70%
10 years10,0001.10%

As you can see, the longer the periods are, the higher the interest rates are.

How Do Vanguard Brokerage CDs Work?

Vanguard offers brokered CDs through its network of 100 dealers nationwide. Some points you have to know how they work are listed below:

  • You can set up multiple accounts from different banks. As you may know, the Federal Deposit Insurance Corporation(FDIC) offers to every account holder at a bank up to US250,000. If an investor holds more than one account or the account limit is over US250,000 at a bank, full protection of the amount per account cannot be accessible. However, at Vanguard, you can set up multiple accounts from different banks and have funds fully insured by FDIC if you have funds of more than US250,000. You have all accounts from various banks at one shop – Vanguard!
  • In Vanguard, you can implement the strategy of “CD laddering.” That is, you create a portfolio of CDs with different maturities and take advantage of reinvesting the proceeds with interest at the best rates from banks in one place.
  • The advantage of “CD Laddering” is you can control over how to control your cash flows by determining CD maturities. However, by actively managing your CDs, you should spend some of your time examining and implementing your portfolio strategies yourself. The other option is to talk to your financial advisor and make an investment plan.  
  • You can sell your CDs on the stock market and still retain the accrued interest for your own. What is more, Vanguard does not charge a commission for the sale of CDs. However, you should beware of the ups and downs of CD prices due to interest rate changes, and third parties may charge the transaction fees on the stock market.
  • Finally, you should note the principal and interest will not renew automatically. The proceeds are deposited into a Vanguard market money account upon maturity. You should renew through Vanguard’s official website or its customer service hotline.

How Much Will You Earn With Vanguard CDs?

It is a good question! It depends on interest rates and time. The longer you put into a CD account in a common market situation, the higher it earns more interest. The interest difference between CD with less than 18 months(0.05%) and 10 years(1.10%) is 1.05% from the table above. If you deposit 1,000,000 into a CD, the latter yields more than 10,000 dollars per year!

You should also remember to renew expired CDs or may not maximize the profit potential as the interest from the market money account is less than CDs’ even though it may compound the interest.

How Vanguard Compares to Other Banks

Vanguard’s CD rates are lower than some competitors. The CD offers from Fidelity are similar to Vanguard’s; however, the APYs offered are lower than some by online banks like Ally Bank and Marcus by Goldman Sachs. The following table is for comparison:

CD term lengthAlly Bank CDsMarcus(Goldman Sachs)Fidelity brokered CDsVanguard brokered CDs
6 month0.25%0.15%0.02%0.05%
1 year0.60%0.55%0.05%0.05%
3 year0.65%0.55%0.15%0.20%
5 year0.85%0.60%0.45%0.45%

What Are the Benefits of Vanguard CDs?

Vanguard is a convenience store of various CDs. Different types of CD investors find their matches in one stop. The benefits include:

  1. All types of term lengths: Vanguard covers 11 kinds of maturities from one month to 10 years. Investors can choose one easily among them. 
  2. Competitive interest rates: Rate offers from banks are available for investors basing their criteria.
  3. Fee-free sales: One of the benefits is you can sell the CDs on the market and cash out your principal and interest earlier than maturity dates. The other is Vanguard does not charge you a commission.
  4. Sophisticated app: Like other financial institutions, you can monitor your investments on the app. by Vanguard on Android, IOS, and Alexa.
  5. Extensive education resources: Vanguard also provides informative resources like videos, guides, and expert advice to invest in CDs.
  6. Ownership structure: Vanguard sets up different account structures like an individual or joint account to help CD savers to attain their financial goals.
  7. Connect outside accounts: What makes Vanguard unique is its company structure. It is a mutual company. The clients own Vanguard, so the company is more focused on their clients than other investing companies.

Things to Consider Before Getting a Vanguard CD

  • Minimum deposit: Vanguard requires initial and subsequent deposits with a minimum increment of 1,000 dollars. The other financial institutions have lower minimum requirements.
  • Simple interest: Expired CDs will not renew automatically and need investors’ further calls. The proceeds of CDs park in Vanguard’s money market funds with a lower interest rate.
  • Fee for secondary market transactions: Though Vanguard does not charge a commission for sale on secondary markets, it will charge other transaction fees related to the CD.
  • Account service fees: There is an annual account service fee of $20 charged to the account if the minimum deposit is below $10,000; however, Vanguard will waive it if you sign up for an e-statement.
  • Support: Unlike other financial institutions, Vanguard does not provide phone service beyond business hours and real-time online service.

Final Thought: Are Vanguard CDs Right for You?

Vanguard brokered CDs offer customers multiple shopping easy in one place. Investors can review quotes from different banks and make the right choice.

Besides, what is essential is investors can get full deposit protection other institutions cannot provide. They can make use of per-account and per-bank quotas to fully insure deposits of over $250,000.

Short-term investors can park their money to utilize Vanguard’s CD rates to maximize their profits as it offers various terms of CDs. Long-term investors can include them in their portfolios for further strategic investment implementation.

To maximize profits and implement investment decisions, you need insightful information and professional financial markets analysis to keep you updated. Investoralist is an online magazine providing financial knowledge and expert commentary related to stocks, mutual funds, ETFs, cryptocurrency, CDs, and investment-related information under one roof.

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