While expectations are in place for multiple interest rate hikes this year, some investors are still searching for income derived from sources beyond U.S. government debt. That includes embracing steady, investment-grade corporate bonds and the corresponding exchange traded funds.
The Vanguard Intermediate-Term Corporate Bond ETF (NYSEArca: VCIT) is one of the preferred options for investors looking to trim duration while not sacrificing too much yield by moving down to a low-yield short duration fund.
Fixed-income investors would typically move down the yield curve to hedge against rising interest rate risks. However, while moving down the yield curve provides a greater level of safety, lower duration bond funds come with less appealing yields.
VCIT seeks a “moderate level of income by investing in investment-grade corporate bonds with a dollar-weighted average maturity of five to ten years. The fund is comprised of 1801 bonds and has total net assets of $11.4 billion,” according to Investopedia.