Bonds: Total Market

As investors prepare for year-end taxes after a volatile 2025, many are exploring ways to reduce their tax burden through strategies like tax loss harvesting and structural portfolio adjustments. Active ETFs, according to T. Rowe Price’s Kevin Signorelli and Chris Murphy, can play a key role in minimizing tax impacts. 

 

ETFs inherently generate fewer taxable events than mutual funds due to their creation and redemption mechanism, which limits capital gains distributions. Active ETFs add further efficiency, often operating at lower costs while maintaining flexibility to manage holdings strategically. 

 

They also offer effective vehicles for tax loss harvesting, allowing investors to shift from underperforming funds into more promising active strategies, such as international or tech-focused ETFs. 


Finsum: As active ETFs continue to expand, they provide investors with more tools to optimize portfolios for both performance and tax efficiency.

Investor interest in international bonds has been accelerating, as July fund flows showed a marked uptick in overseas bond allocations, according to Morningstar data. This trend reflects a growing desire to diversify away from U.S. bond exposure, with Vanguard offering three compelling options for investors seeking global fixed income opportunities. 

 

A weaker dollar, pressured by expectations of falling rates, has further boosted the appeal of international assets, drawing more flows into global and emerging market bond funds. For those balancing domestic and global exposure, the Vanguard Total World Bond ETF (BNDW) offers nearly equal allocations between U.S. and international bonds at a minimal 0.05% expense ratio. 

 

Investors who prefer a pure international approach may turn to the Vanguard Total International Bond ETF (BNDX), which focuses on developed markets, or the Vanguard Emerging Markets Government Bond ETF (VWOB), which provides higher yields through EM sovereign debt. 


Finsum: Total bond funds present flexible avenues for enhancing portfolio diversification and capturing income beyond U.S. borders.

After the Federal Reserve’s first rate cut of the year, investors wonder how they can better position portfolios in a changing bond market. Thornburg’s Christian Hoffmann and VettaFi’s Todd Rosenbluth noted that while the bond market initially reacted positively, much of the impact was already priced in, and expectations for further cuts are stronger than anticipated. 

 

Hoffmann emphasized that the market is at an inflection point driven by both economic data and potential changes in the Fed’s composition under political pressure. He argued investors should remain overweight duration and prepare for the possibility of a more dovish Fed with tools such as yield curve control. 

 

Against this backdrop, Hoffmann highlighted the role of active management, pointing to Thornburg’s Core Plus Bond ETF (TPLS) for flexible core exposure and its Multi-Sector Bond ETF (TMB) for income diversification. 


Finsum: Active funds could provide solutions in an uncertain rate environment, echoing the adage: “Don’t fight the Fed.”

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