First up: Bond ETFs

Discover Vanguard bond ETFs®

See which could be right for you

If they’re new to you, you’re not alone. In fact, bonds are generally one of the most misunderstood investments. But they don’t have to be.

Whether you’re a retiree seeking income or you’re saving for a short-term goal, like a wedding or a dream vacation, bond ETFs could be the right choice.

But before we dive any further into bond ETFs, here’s …

A quick refresher on bonds

Bonds offer 2 key benefits—an income stream and an opportunity to offset the risks of stock ownership.

When corporations or state, local, or federal governments want to raise money, they issue a bond. When you invest in that bond, you’re giving the issuer—that corporation or government—a loan. In return, they agree to pay back the full amount of the loan—the face value—on a certain date. They also agree to pay you interest on a regular schedule. That’s why you may have heard bonds referred to as “fixed income” investments.

Bonds tend to be less risky than stocks. That’s because, unlike stocks, bonds issued by corporations don’t give you ownership rights. So even though you won’t reap the rewards when a company expands, you aren’t subjecting yourself to substantial risk if the company doesn’t perform well.

Though safer than stocks, bonds carry several types of risk, including default. For example, if you buy a bond from a company or government that isn’t stable (or becomes unstable over time), you run the risk that they might not be able to pay you the interest they promised, or in some cases, to repay the face value of the bond when it matures. So while they’re much less volatile than stocks, bonds aren’t entirely risk-free.

Then what’s a bond ETF?

Bond ETFs invest solely in bonds. But a single bond ETF invests in hundreds, sometimes thousands, of individual bonds, giving you instant diversification. That means if a single bond defaults, many others can help offset that risk, which is essential to a well-constructed investment portfolio.

Owning a bond ETF is affordable for the average investor. You can get access to all of those bonds for the trading price of 1 ETF share, which starts at around $50, instead of having to buy each bond separately.

Different bond types

An all-inclusive bond ETF is the most efficient way to invest in a mix of many bond types that cover nearly all aspects of the U.S. and international bond markets—in a single, broadly diversified investment.

Other bond ETFs invest in specific bond types that focus on one or more of the following:

Average maturity. The average length of time until each bond in the fund reaches its specific maturity date. Maturity bands range from short-term (less than 5 years) to intermediate-term (between 5 and 10 years) to long-term (more than 10 years). Shorter-term bonds generally have less interest-rate risk than longer-term bonds.

Average credit quality. The main criteria for assessing the quality of a bond fund, so you know how likely it is that you’ll receive your expected payments. You may be familiar with “A,” “B,” and “C” bond ratings: The higher the grade, the lower the risk, and generally, the lower the return. And vice versa.

Geographic. Some bond ETFs invest by region—for example, U.S. versus international (or global—a blend of U.S. and international), including emerging markets.

Niche. These bonds focus on a particular market sector or industry, such as mortgage-backed, Treasury Inflation-Protected Securities (TIPS), or tax-exempt bonds (known as “municipal” or “muni” bonds).

How do bond ETFs compare with individual bonds?

Bond ETFs offer certain advantages. Remember that diversification concept we mentioned earlier? A bond ETF is less risky because of that diversity.

Another difference is called “laddering.” A bond ladder staggers investments so different bonds mature at different times, ensuring a consistent income stream. But creating and maintaining a bond ladder is labor-intensive and potentially expensive because of the transaction costs involved.

In addition, bond ETFs hold an ever-changing portfolio of bonds. As individual bonds mature, the portfolio manager reinvests the proceeds in new bonds. Think of it as built-in laddering at the hands of an investment professional.

Finally, bond ETFs are more accessible than individual bonds. Bond ETFs are easier and cheaper to buy and sell, and you can trade them during market hours, even if the underlying bonds aren’t trading at the time.

Could bond ETFs be right for you?

Bond ETFs are suited for just about any investor, including retirees looking for regular income and anyone saving for a long- or short-term goal.

For retirees, bond ETFs offer an income stream in monthly or quarterly distributions. ETFs that invest in longer-term bonds provide a chance for greater income, but they’re riskier. ETFs that invest in shorter-term bonds offer lower risk but provide less income. A combination of both types can provide retirees balance between income and risk.

Even if you’re not a retiree, bond ETFs may still have a place in your portfolio. If you’re saving for retirement, you can use them to offset stock market volatility. In general, the younger you are, the lower the percentage of bond ETFs you should have in your portfolio; the closer you get to retirement age, the greater the percentage.

Or, if you have a shorter-term goal in mind—a luxury cruise or a vacation home—bond ETFs can help you save. It beats stuffing wads of cash under your mattress.

Which Vanguard bond mutual funds have corresponding ETFs?

The following charts show Vanguard bond ETFs and how they match up with their bond mutual fund counterparts. Read about the similarities and differences between ETFs and mutual funds.

For the most all-inclusive, broadly diversified global bond investment:

Ticker

Vanguard ETF® name

Ticker

Vanguard mutual fund name

BNDW

Total World Bond ETF

No mutual fund counterpart


For global diversification split between U.S. and international exposure:

Ticker

Vanguard ETF® name

Ticker

Vanguard mutual fund name

BND

Total Bond Market ETF

VBTLX

Total Bond Market Index Fund Admiral™ Shares

BNDX

Total International Bond ETF

VTABX

Total International Bond Index Fund Admiral Shares

For a more targeted approach:

Broad-market bond ETFs

Ticker

Vanguard ETF® name

Ticker

Vanguard mutual fund name

BSV

Short-Term Bond ETF

VBIRX

Short-Term Bond Index Fund Admiral Shares

BIV

Intermediate-Term Bond ETF

VBILX

Intermediate-Term Bond Index Fund Admiral Shares

BLV

Long-Term Bond ETF

VBLAX

Long-Term Bond Index Fund Admiral Shares


Corporate bond ETFs

Ticker

Vanguard ETF® name

Ticker

Vanguard mutual fund name

VCSH

Short-Term Corporate Bond ETF

VSCSX

Short-Term Corporate Bond Index Fund Admiral Shares

VCIT

Intermediate-Term Corporate Bond ETF

VICSX

Intermediate-Term Corporate Bond Index Fund Admiral Shares

VCLT

Long-Term Corporate Bond ETF

VLTCX

Long-Term Corporate Bond Index Fund Admiral Shares

VTC

Total Corporate Bond ETF

No mutual fund counterpart


Treasury bond ETFs

Ticker

Vanguard ETF® name

Ticker

Vanguard mutual fund name

VGSH

Short-Term Treasury ETF

VSBSX

Short-Term Treasury Index Fund Admiral Shares

VGIT

Intermediate-Term Treasury ETF

VSIGX

Intermediate-Term Treasury Index Fund Admiral Shares

VGLT

Long-Term Treasury ETF

VLGSX

Long-Term Treasury Index Fund Admiral Shares

EDV

Extended Duration Treasury ETF

No mutual fund counterpart


I
nternational bond ETFs

Ticker

Vanguard ETF® name

Ticker

Vanguard mutual fund name

VWOB

Emerging Markets Government Bond ETF

VGAVX

Emerging Markets Government Bond Index Fund Admiral Shares


Niche bond ETFs

Ticker

Vanguard ETF® name

Ticker

Vanguard mutual fund name

VMBS

Mortgage-Backed Securities ETF

VMBSX

Mortgage-Backed Securities Index Fund Admiral Shares

VTIP

Short-Term Inflation-Protected Securities ETF

VTAPX

Short-Term Inflation-Protected Securities Index Fund Admiral Shares

VTEB

Tax-Exempt Bond ETF

VTEAX

Tax-Exempt Bond Index Fund Admiral Shares

 

Notes:

You must buy and sell Vanguard ETF Shares through Vanguard Brokerage Services (we offer them commission-free) or through another broker (which may charge commissions). See the Vanguard Brokerage Services commission and fee schedules for full details. Vanguard ETF Shares are not redeemable directly with the issuing fund other than in very large aggregations worth millions of dollars. ETFs are subject to market volatility. When buying or selling an ETF, you will pay or receive the current market price, which may be more or less than net asset value.

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.

Bond funds are subject to the risk that the issuer will fail to make payments on time and that bond prices will decline because of rising interest rates or negative perceptions of an issuer’s ability to make payments. Investments in bonds are subject to interest rate, credit, and inflation risk. Although the income from a municipal bond fund is exempt from federal tax, you may owe taxes on any capital gains realized through the fund’s trading or through your own redemption of shares. For some investors, a portion of the fund’s income may be subject to state and local taxes, as well as to the federal Alternative Minimum Tax. Although the income from the U.S. Treasury obligations held in the fund is subject to federal income tax, some or all of that income may be exempt from state and local taxes.

Stocks of companies based in emerging markets are subject to national and regional political and economic risks and to the risk of currency fluctuations. These risks are especially high in emerging markets. 

Investments in stocks and bonds issued by non-U.S. companies are subject to risks including country/regional risk, which is the chance that political upheaval, financial troubles, or natural disasters will adversely affect the value of securities issued by companies in foreign countries or regions; and currency risk, which is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. These risks are especially high in emerging markets.