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Best Vanguard Bond Funds for 2014



Review the list of 2014 best Vanguard bond, fixed income mutual funds with top ratings. Highest performing, recommended bond funds for IRA/brokerage account investors in the last 10 years: VFSTX, VBTLX, VFISX, VWESX, VBLTX, VFICX



Best Vanguard Bond Mutual Funds in 2014


Vanguard bond funds invest in corporate, municipal, or U.S. government debt. Most have a focus on income, rather than investment growth.

Who should invest
Investors who want income at potentially higher yields than money market rates and are willing to accept some ups and downs in the value of their fund shares.

What to keep in mind
  • Can be appropriate for short-, medium-, or long-term goals where you're looking for an income stream.
  • Can be appropriate for diversifying the risks of stocks in a portfolio.




Vanguard Short-Term Investment-Grade Fund Investor Shares (VFSTX)


Strategy
This fund is designed to give investors exposure to high- and medium-quality, investment-grade bonds with short-term maturities. The fund invests in corporate bonds, pooled consumer loans, and U.S. government bonds.

Returns
The fund has returned 1.36% over the past year, 2.45% over the past three years, 3.80% over the past five years, and 3.67% over the past decade.

Best Vanguard Bond Funds 2014

Purchase info: minimum initial investment is $3,000; an expense ratio is 0.20%.




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Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)


Strategy
This fund is designed to provide broad exposure to U.S. investment grade bonds. Reflecting this goal, the fund invests about 30% in corporate bonds and 70% in U.S. government bonds of all maturities (short-, intermediate-, and long-term issues). As with other bond funds, one of the risks of the fund is that increases in interest rates may cause the price of the bonds in the portfolio to decrease—pricing the fund’s NAV lower. Because the fund invests in all segments and maturities of the fixed income market, investors may consider the fund their core bond holding.

Returns
The fund has returned -2.01% over the past year, 3.15% over the past three years, 5.18% over the past five years, and 4.88% over the past decade.

Best Vanguard Bond Funds 2014

Purchase info: minimum initial investment is $10,000; an expense ratio is 0.10%.





Vanguard Short-Term Treasury Fund Investor Shares (VFISX)


Strategy
This fund invests in debt issued directly by the government in the form of Treasury bills. A key risk of the fund is the fact that changes in interest rates can eventually lead to a decrease in income for the fund. The fund has a reduced risk of default, since the bonds in the portfolio are backed by the full faith and credit of the U.S. government.

Returns
The fund has returned -0.08% over the past year, 0.89% over the past three years, 2.11% over the past five years, and 2.90% over the past decade.

Best Vanguard Bond Funds

Purchase info: minimum initial investment is $3,000; an expense ratio is 0.20%.




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Vanguard Long-Term Investment-Grade Fund Investor Shares (VWESX)


Strategy
This fund provides diversified exposure to medium-and high- quality investment-grade corporate bonds with an average maturity of 15 to 25 years. Reflecting this goal, the fund invests primarily in corporate bonds, with a small percentage in taxable municipal bonds, within that maturity range. One of the fund’s risks is that increases in interest rates may reduce the price of the bonds in the portfolio, which would reduce the fund’s share price. Changes in interest rates have a bigger impact on bonds with longer-term maturities. Investors who are looking for a fund that seeks to provide interest income and are able to tolerate significant interest rate risk may wish to consider this fund.

Returns
The fund has returned -5.98% over the past year, 7.09% over the past three years, 9.44% over the past five years, and 7.07% over the past decade.

Best Vanguard Bond Funds

Purchase info: minimum initial investment is $3,000; an expense ratio is 0.22%.





Vanguard Long-Term Bond Index Fund (VBLTX)


Strategy
This index fund offers a low-cost, diversified approach to bond investing, providing broad exposure to U.S. investment-grade bonds with maturities of more than ten years. Reflecting this goal, the fund invests about 60% of assets in corporate bonds and 40% in U.S. government bonds within that maturity range. Because long-term bonds tend to be very sensitive to interest-rate changes, one of the fund’s key risks is that increases in interest rates may reduce the price of the bonds in the portfolio, which would reduce the fund’s share price. Investors who are looking for a fund that seeks to provide interest income and are able to tolerate significant interest rate risk may wish to consider this fund.

Returns
The fund has returned -9.14% over the past year, 6.38% over the past three years, 8.46% over the past five years, and 7.09% over the past decade.

Best Vanguard Fixed Income Funds

Purchase info: minimum initial investment is $3,000; an expense ratio is 0.20%.





Vanguard Intermediate-Term Investment-Grade Fund Investor Shares (VFICX)


Strategy
This fund provides diversified exposure to medium- and high-quality investment-grade bonds with an average maturity of five to ten years. Reflecting this goal, the fund invests in corporate bonds, pooled consumer loans, and U.S. government bonds within that maturity range. Risks of the fund include the fact that changes in interest rates, both up and down, can affect the fund by resulting in lower bond prices or an eventual decrease in income for the fund. Because the fund invests in only one maturity segment of the fixed income market, it may be considered complementary to a core bond holding in an investment portfolio.

Returns
The fund has returned -0.10% over the past year, 5.09% over the past three years, 7.10% over the past five years, and 5.59% over the past decade.

Best Vanguard Fixed Income Funds

Purchase info: minimum initial investment is $3,000; an expense ratio is 0.20%.

This article was updated on 4/19/2014.


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