Displaying items by tag: vanguard

Investors with goals in the three- to 10-year range, those already retired, or anyone seeking portfolio stability often benefit from including bonds. Fixed-income exchange-traded funds (ETFs) offer a simple and cost-effective way to gain this exposure, with many tracking indexes that provide transparency on duration and credit quality. 

Low expenses are especially important for bond ETFs, where returns are typically more modest than in stocks, making cost efficiency a key driver of performance. Morningstar’s highest-rated Gold Medalist bond ETFs—such as Vanguard Total Bond Market ETF (BND), iShares Core US Aggregate Bond ETF (AGG), and Fidelity Total Bond ETF (FBND)—can serve as solid anchors for the fixed-income portion of a portfolio. 

These ETFs span categories like intermediate-term core and core-plus bond funds, with some offering added flexibility to invest in high-yield, bank loans, or emerging-market debt. 

Finsum: For investors seeking stability, diversification, and liquidity, these total market bond ETFs provide a strong starting point.

If you're considering a core bond holding for your portfolio, the Vanguard Total Bond Market Index Institutional Fund (VBTIX) is a strong contender worth a closer look. Launched in 1995 and managed by Joshua Barrickman since 2013, VBTIX offers broad exposure to the U.S. investment-grade bond market and has grown to more than $43 billion in assets. 

Over the past five years, it delivered an annualized return of -0.94%, but has shown moderate volatility, with a five-year standard deviation of 6.26%—notably lower than the category average of 12%, making it a relatively stable option. With an ultra-low expense ratio of just 0.04% and no sales load, the fund is significantly cheaper than most of its peers, though it does require a high $5 million minimum investment. 

VBTIX's beta of 1 suggests it tracks the bond market closely, while its slightly negative alpha (-0.04) reflects challenges in beating the benchmark on a risk-adjusted basis. 

Finsum: For large institutions or high-net-worth investors seeking cost-efficient, diversified bond exposure with low volatility, VBTIX could be a foundational piece of a fixed-income strategy.

Interval funds, which offer limited liquidity and access to private markets, are gaining traction as investors seek alternatives to traditional ETFs and mutual funds. Asset managers like TCW, Blackstone, and Vanguard have launched new interval funds this year, bringing the total to 139 with about $100 billion in assets. 

These funds, which allow redemptions only at set intervals (typically quarterly), enable investments in less liquid assets like private credit. For example, TCW’s new fund focuses 80% on private asset-backed credit, illustrating the shift toward alternative income strategies. 

Meanwhile, attempts to bring private asset exposure to ETFs, such as the PRIV ETF, have struggled due to regulatory concerns over liquidity and naming.

Finsum: Advisors are increasingly allocating client portfolios to interval funds, favoring their higher yields despite reduced liquidity and higher fees.

Higher income returns supported strong bond market performance in 2024, with lower-quality credit outperforming amid favorable economic conditions. The 2025 outlook for fixed income remains positive, as real interest rates are expected to stay above inflation, offering attractive yields and portfolio diversification benefits. 

While monetary easing is likely to continue, it will proceed at a slower pace, and policy uncertainties—such as trade, immigration, and fiscal decisions—could introduce market volatility. 

Given these dynamics, a tactical approach to rates and credit strategies is recommended, with a preference for sectors that have lagged in spread tightening. Municipal bonds remain compelling for high earners, offering tax-equivalent yields above most taxable sectors. 

Finsum: Disciplined risk management and active security selection can help investors navigate an evolving fixed-income landscape.

Vanguard announced its largest-ever expense reduction, cutting fees on 87 funds by one to six basis points, translating into over $350 million in investor savings for 2025. The lower costs apply to a range of funds, including bond mutual funds, ETFs, U.S. and international equities, and money market funds. 

CEO Salim Ramji emphasized that reduced fees help investors retain more returns, aligning with the firm’s broader strategy to expand its fixed-income offerings. Chief Investment Officer Greg Davis highlighted the growing role of bonds in investor portfolios and the long-term benefits of compounding savings.

 Vanguard, managing $10.4 trillion as of November 2024, has consistently lowered investing costs since its founding by Jack Bogle in 1975. Competing with BlackRock, it remains one of the world's largest providers of low-cost ETFs, offering 428 funds globally, including 212 in the U.S.

Finsum: Advisors need a strategy to articulate the importance of fee structure to clients, because its integral to their portfolios and can strengthen relationships by providing clarity and demonstrating communication.