Stocks on the move: CRM, INTU, WFC >>> READ MORE

4 Vanguard Bond Funds to Buy (And 3 to Avoid) for Higher Interest Rates

Higher rates are coming and now is a good time to distinguish between the best and worst bond funds

      View All  

Vanguard Bond Funds to Avoid for Higher Rates: Vanguard Long-Term Bond Index (VBLTX)

Vanguard Bond Funds to Avoid for Higher Rates: Vanguard Long-Term Bond Index (VBLTX)
Source: Shutterstock

Expenses: 0.15%
Minimum Initial Investment: $3,000

Generally, the longer the duration of the bond, the greater the interest rate risk. This makes Vanguard Long-Term Bond Index (MUTF:VBLTX) one of the Vanguard bond funds to avoid when interest rates are expected to rise.

Not only are long-term bonds more sensitive to interest rates, the passive nature of VBLTX can also be a negative when rates are rising because the fund manager is powerless to make adjustments to decrease the average duration of the holdings.

So, if there is a sharp increase in interest rates, there will be a sharp decrease in long-term bond prices, and the long-term bond index investor is forced to passively step off the proverbial cliff along with those falling prices.

Next Page


Article printed from InvestorPlace Media, http://investorplace.com/2017/08/4-vanguard-bond-funds-to-buy-for-higher-interest-rates/.

©2017 InvestorPlace Media, LLC