The Vanguard Short-Term Bond ETF is considered a safe fixed-income holding as its short duration of 2.65 years helps limit the negative effects of rising interest rates. However, due to the conservative nature of the fund, BSV only comes with a 0.76% 30-day SEC yield. The fund also comes at a low 0.10% expense ratio.
The Vanguard Short-term Inflation-Protected Securities ETF helps mitigate two negative factors that weigh on bonds: interest rate risk and inflation risk. VTIP has a 1.8 year duration, -1.37% 30-day SEC yield and a 0.10% expense ratio. SEC yields can dip into negative territory as it is equal to the Treasury bond yield minus the rate of expected inflation. Consequently, investors can think of it as a premium people are willing to pay for inflation protection.
Lastly, the Vanguard Dividend Appreciation Index ETF, while not a fixed-income security, provides exposure to quality dividend stocks that have raised their annual dividends for at least 10 years in a row. The companies typically include large, established firms with low financial leverage and steady earnings. VIG has a 1.85% 12-month yield and a 0.10% expense ratio. [Dividend Growth Via ETFs]
For more information on saving toward retirement, visit our retirement category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of BOND.