While short duration is often touted in the current market environment where rising interest rates amid higher inflation is a prime area of focus for advisors, fixed income investors can still look to long-duration for extra yield.
That said, Vanguard has a pair of funds that give investors this type of exposure. In one instance, investors can opt for safer investment-grade bonds and the other for higher-yielding corporate bonds.
Bond investors who strictly want to stay in the safe confines of investment-grade debt with a nice mix of government and corporate bonds can opt for the Vanguard Long-Term Bond Index Fund ETF Shares (BLV). The fund comes with a minuscule expense ratio of 0.05%.
BLV seeks to track the performance of the Bloomberg U.S. Long Government/Credit Float Adjusted Index. This index includes all medium and larger issues of U.S. government, investment-grade corporate, and investment-grade international dollar-denominated bonds with maturities of greater than ten years and are publicly issued.
As such, BLV can draw from various options when it comes to bond investments. As mentioned, the common denominator is that the fund sticks to higher duration with debt holdings that exceed a decade.
Product summary per the Vanguard website:
- Seeks to track the performance of the Bloomberg U.S. Long Government/Credit Float Adjusted Index.
- Exchange-traded share class.
- Passively managed using index sampling.
- Diversified exposure to the long-term, investment-grade U.S. bond market.
- Provides high current income with high credit quality.
Added Dose of Yield With Corporate Bonds
For added yield with more rate risk, there’s the Vanguard Long-Term Corporate Bond Index Fund ETF Shares (VCLT). As per the fund description, VCLT seeks to track the performance of a market-weighted corporate bond index with a long-term dollar-weighted average maturity.
Furthermore, the fund employs an indexing investment approach designed to track the performance of the Bloomberg U.S. 10+ Year Corporate Bond Index. This index includes U.S. dollar-denominated, investment-grade, fixed-rate, taxable securities issued by industrial, utility, and financial companies, with maturities greater than ten years. Under normal circumstances, at least 80% of the fund’s assets will be invested in bonds included in the index.
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