3 Bond Funds to Buy for Yield and Stability in 2022


  • Consider these three U.S. bond funds to buy for yield and stability during these tumultuous times:
  • Vanguard Short-Term Corporate Bond ETF (VCSH)
  • iShares Interest Rate Hedged High Yield Bond ETF (HYGH)
  • Vanguard Total Bond Market ETF (BND)


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Investors who are frustrated by the topsy-turvy nature of the stock market might want to consider moving money into bond funds that offer both yield and stability during these volatile times. Bond funds, or exchange-traded funds (ETFs), are typically pooled investments comprised mostly of bonds, i.e. government or corporate debt issuance. Bonds tend to be much more stable than stocks, offering less gains but also fewer losses. And the main goal of a bond fund is not capital appreciation but to provide investors with monthly or quarterly income in the form of dividend payments. As such, bond funds are popular among investors who have entered retirement and are seeking to protect their nest egg while earning a regular source of income. However, bond funds also attract investors during bear markets as they are seen as a safe port during stormy times. With the stock market continuing its relentless selloff that began last November, we look at three U.S. bond funds to buy that offer both yield and stability.

VCSH Vanguard Short-Term Corporate Bond ETF $75.80
HYGH iShares Interest Rate Hedged High Yield Bond ETF $81.21
BND Vanguard Total Bond Market ETF $73.64

Bond Funds to Buy: Vanguard Short-Term Corporate Bond ETF (VCSH)

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First up is Vanguard’s Short-Term Corporate Bond ETF (NASDAQ:VCSH). This fund tracks the performance of the Bloomberg U.S. 1–5 Year Corporate Bond Index and offers investors exposure to a diversified collection of short-term investment-grade U.S. corporate bonds. The fund holds a total of 2,338 bonds in its portfolio, with the bonds maturing, on average, in just under three years.

VCSH has a lot to recommend it, including rock-bottom fees of only 0.04%, which, in keeping with Vanguard’s practice, is a mere fraction of what similar funds charge investors. The fund’s long-term returns are also impressive. In the past ten years, the fund has returned 18.80% to investors, and it has gained 34.86% since its inception in 2009. In 2022, the fund is down a slight 1.26%.

In terms of yield, VCSH currently provides investors with a dividend yield of 4.07%, which is good for a quarterly payout of 14 cents per share. When it comes to stability, yield, fees, and returns, investors would be hard-pressed to find a better bond fund than this one from Vanguard, which is a leader in exchange-traded funds (ETFs).

iShares Interest Rate Hedged High Yield Bond ETF (HYGH)

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A good bond fund to own in times of rising interest rates is the iShares Interest Rate Hedged High Yield Bond ETF (NYSEARCA:HYGH), which is issued by BlackRock (NYSE:BLK). While the  fund’s expense ratio of 0.52% is higher than Vanguard’s, HYGH yields an impressive 5.2%, which equates to a quarterly payout of 34 cents per share.

The HYGH fund aims to mitigate the risks of interest rates on a portfolio. As a result, the fund is primarily composed of U.S. dollar-denominated, high-yield corporate bonds. The fund is frequently adjusted to manage interest rate risks and adapt to changes in credit spreads within financial markets. It accomplishes this by incorporating a decent amount of interest rate swaps into the fund.

In terms of performance, HYGH has returned 3.6% to investors over the past three years, and it has gained 3.4% over the last five years.

Vanguard Total Bond Market ETF (BND)

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Another bond fund from Vanguard is the Total Bond Market ETF (NASDAQ:BND), which has the distinction of being the world’s biggest bond fund with $83.71 billion of assets under management. The fund holds more than 10,000 bonds, including a mix of top rated U.S. government bonds and corporate bonds from companies such as Amazon (NASDAQ:AMZN) and Ally Financial (NYSE:ALLY).

The cost to hold the BND ETF in a portfolio is about as low as it gets, with an expense ratio of just 0.03%. The fund is also extremely stable. While it doesn’t generate huge returns as with stocks, the fund has risen 1.28% over the past 10 years and is up 3.06% since its inception back in 2007. In terms of its dividend, the fund currently yields 2.28% or a quarterly payment to shareholders of 16 cents per share.

On the date of publication, Joel Baglole  held no positions in stocks or ETFs mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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