In this feature of Vanguard mutual funds, we’ll turn the spotlight onto a selection of eight Vanguard investment-grade bond funds that cover a broad range of fixed income needs.
Investment-grade bond funds offer investors a balance of risk and yield that can combine for a sweet spot of bond fund investing. Investing in highly rated bonds, such as U.S. Treasury bonds or corporate bonds with high credit ratings, can be good conservative choices but they kick off lower yields. And the high-yield bonds can be attractive for income purposes but the market risk may be too much for conservative investors.
In summary, investment-grade bonds cover the middle ground of risk and return, where investors can get decent yields without taking on excessive market risk.
Today, we’ll take a quick look at eight Vanguard bond funds that hold investment-grade bonds and that cover a full range of duration and yield.
Vanguard Investment-Grade Bond Funds
Vanguard Core Bond Fund (VCORX): Vanguard’s VCORX is an actively-managed bond fund that offers a low-cost means of accessing a broad range of bonds, including U.S. Treasury, mortgage-backed, and corporate bonds of various yields and maturities. Currently, the average duration is 6 years and the yield is 2.6%. The expense ratio is 0.25%, or $25 for every $10,000 invested.
Vanguard Intermediate-Term Corporate Bond Index (VICSX): This bond fund from Vanguard focuses on corporate, investment-grade bonds with maturities ranging between 5 and 10 years, hence the intermediate-term moniker. With an average duration of 6.4 years and no U.S. government bonds in the mix, the market risk is a bit higher than the core bond fund and thus a higher yield, which was recently 3.4%. The expense ratio is rock bottom at 0.07%. However, VICSX is an Admiral Shares fund, which means the minimum initial investment is $10,000.
Vanguard Intermediate-Term Investment-Grade (VFICX): Vanguard’s VFICX invests in a diverse mix of mid- to high-quality bonds with a range of maturities that average out to be 6.1 years in duration. The blend of credit quality averages at investment-grade. VFICX has a current yield of 2.7%. The expense ratio is low at 0.20%, or $20 for every $10,000 invested.
Vanguard Long-Term Corporate Bond Index (VLTCX): Investors willing to take on more interest rate risk for the potential for higher returns in the the long run may want to consider VLTCX, which holds investment-grade corporate bonds with maturities of 10 years or more. Yields for long-term bonds average higher than short- and intermediate-term bonds but rising interest rates can push bond prices lower for bonds with longer maturities. The yield is currently a healthy 4.6% and the expense ratio is cheap at 0.07%, or $7 for every $10,000 invested. However VLTCX is an Admiral Shares fund, which means the minimum initial purchase is $10,000.