Fixed income investors looking for a high risk, high reward option when it comes to yields should give the Vanguard Extended Duration Treasury Index Fund ETF Shares (EDV) a closer look.

“Long-term bonds usually offer high returns but at considerably higher risk. In 2011, the Vanguard Extended Duration Treasury ETF (EDV) performed exceptionally well and garnered yields of 55% for its investors,” a Wiser Advisor article explained. “This clearly establishes that, in most cases, long-duration bonds offer similar benefits as associated with high-risk asset classes like small-cap stocks. This is because when overall bond earnings fall in the short term, long-term bonds usually perform better, making them a perfect trading vehicle.”

Nonetheless, simply going longer on bonds isn’t a binary move to get the best yields. Investors must understand the risks associated with the added duration, such as unforeseen market events like COVID-19.

“However, this does not imply that lengthy tenure bonds are the best investment,” the article added further. “Long-term bonds experience extreme volatility in phases, which might persuade you into selling them at a loss. Thus, compromising on your overall financial target. This was evident in the epic decline of the same EDV fund yields to 7.18% from March 7 – March 14, 2012. During this period, many investors exited the bond market. However, the meltdown was only a week-long, and the funds gained full power soon thereafter.”

Stepping Far Out On The Yield Curve

Per the fund description, EDV seeks to track the performance of an index of extended-duration zero-coupon U.S. Treasury securities. The fund employs an indexing investment approach designed to track the performance of the Bloomberg Barclays U.S. Treasury STRIPS 20-30 Year Equal Par Bond Index.

This index includes zero-coupon U.S. Treasury securities (Treasury STRIPS), which are backed by the full faith and credit of the U.S. government, with maturities ranging from 20 to 30 years. The fund invests by sampling the index. At least 80% of its assets will be invested in U.S. Treasury securities held in the index.

Highlights of EDV:

  • Seeks to track the performance of the Bloomberg Barclays U.S. Treasury STRIPS 20–30 Year Equal Par Bond Index.
  • Is passively managed using index sampling.
  • Provides current income with high credit quality.

edv max performance

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