That’s why we’re introducing a new bond ETF (exchange-traded fund) that gives you a simple, low-cost way to invest in investment-grade bonds from around the world in a single ETF.
Vanguard Total World Bond ETF (BNDW) provides:
- Diversification. Interest rates and inflation are the 2 most important drivers of bond returns. Historically, these factors differ from country to country, making global bond exposure an effective way to diversify.
- Simplicity. Total World Bond ETF has exposure to both U.S. and international bond holdings, which means you can maintain a steady U.S. and non-U.S. weighting without having to rebalance yourself.
- Low costs. At an estimated expense ratio of 0.09%, Total World Bond ETF costs 84% less than the average expense ratio of 0.55% for the largest active global bond funds.*
As with all ETFs, there’s no minimum investment, so you can buy Total World Bond ETF for as little as the price of a share through your Vanguard Brokerage Account.
The role of bonds
Bonds play an important role in many investors’ portfolios. They may help diversify risk and generate income.
“Vanguard is the first firm to offer U.S. investors a single index product with exposure to the entire global investment-grade bond universe,” said Vanguard Chief Investment Officer Greg Davis. “It’s simple, convenient, and highly diversified, with an estimated expense ratio in line with our current low-cost fixed income ETFs.”
Total World Bond ETF seeks to track the Bloomberg Barclays Global Aggregate Float Adjusted Composite Index, which is comprised of about 19,000 investment-grade corporate, government, and securitized bonds from more than 30 countries.
To get exposure to the bonds in the index, the Total World Bond ETF invests in a combination of 2 underlying Vanguard ETFs®: Vanguard Total Bond Market ETF (BND) and Vanguard Total International Bond ETF (BNDX).
Total World Bond ETF is market-cap weighted, with the weighting of the underlying ETFs rebalancing on a monthly basis. For example, as of July 31, 2018, the allocation breakdown which most closely mirrored the weighting of the benchmark was: 46% BND and 54% BNDX.
A leader in bond indexing
Vanguard has been a leader in bond indexing since it launched the first bond index fund, Vanguard Total Bond Market Index Fund, in 1986. Vanguard Fixed Income Group, the Total World Bond ETF’s investment advisor, is one of the world’s largest bond fund managers with approximately $1.2 trillion under management. Vanguard has been a participant in the ETF industry for nearly 17 years, meeting the needs of a diverse set of investors with more than 75 ETFs that represent more than $746 billion in client assets.**
*The market-weighted average expense ratio was 0.55% for the largest active global bond funds as of March 30, 2018, according to Simfund and Vanguard analysis.
**Data as of March 31, 2018.
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 interest rate risk, which is the chance bond prices overall will decline because of rising interest rates, and credit risk, which is the chance a bond issuer will fail to pay interest and principal in a timely manner or that negative perceptions of the issuer’s ability to make such payments will cause the price of that bond to decline. Investments in bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.