ETF Spotlight: Vanguard Extended Duration Treasury (EDV)

May 19th at 2:00pm by Tom Lydon

ETF Spotlight on Vanguard Extended Duration Treasury (NYSEArca: EDV), part of a weekly series.

Assets: $302.7 million

Objective: Tracks the Barclays Capital U.S. Treasury STRIPS 20-30 Year Equal Par Bond Index

Holdings: 100% of this ETF is invested in Aaa-rated bonds

What You Should Know

  • The expense ratio is 0.14%, which is touted on Vanguard’s site as being 85% lower than the average expense ratio of funds with similar holdings.
  • This ETF is based on an optimized indexing strategy; this is often done with bond funds because the underlying indexes hold hundreds and even thousands of bonds. EDV has 52 holdings.
  • “STRIPS” is an acronym: separate trading of registered interest and principal securities. STRIPS are bonds sold at a discount to their face value. Since they mature at par, there are no interest payments. [7 Ways to Choose the Right Bond ETF.]

The Latest News

  • As a result of market volatility and a desire for protection, investors poured $375 billion into bond funds last year and another $54 billion in the first two months of this year. [Bond ETFs Were Hot in Q1.]
  • All that safe-haven money is at risk as the economy recovers and interest rates rise; long-term bond funds are especially sensitive. Bond prices and yields have an inverse relationship. [Listen to Our Latest Podcast to Learn More.]
  • As with equity ETFs, bond ETFs can be used in conjunction with a trend following strategy: when a bond ETF moves above the 200-day, it’s a buy; when it drops below, it’s a sell.
  • It’s suggested that investors should look at their bond portfolios like their equity portfolios. Don’t put all your eggs in one basket and be diversified across the yield curve. [Why It's Time to Approach Bond ETFs Differently.]

Go here for previous ETF Spotlights.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

Tickers

EDV