Bond funds hold a collection of debt with varying maturities, buying and selling debt securities to maintain their short-, intermediate- or long-term strategy. When it comes to bond ETFs, investors should look at the duration, or a bond fund’s measure of sensitivity to gauge their investment’s exposure to changes in interest rates – a higher duration means a higher sensitivity to shifts in rates.

VCSH holds nearly 2,200 bonds and has an average duration of 2.8 years. Credit risk with the fund is minimal as nearly all of its holdings are rated Aa, A or Baa.

Vanguard clients can realize additional cost efficiencies with VCSH because the does not charge clients commissions on its ETFs.

For more fixed-income trends, visit the Fixed Income Channel.