Investors looking for core bond exposure typically have two pathways when it comes to ETFs. One is passive options that track an index.
For any retiree nervous about the current state of the market, not only do they have a good reason to be skeptical about short-term growth, but they also have every reason to want to protect their downside.
Vanguard Total Bond Market Index Fund ETF offers a higher yield and lower volatility than equities, making it attractive amid stretched stock valuations. BND currently yields 3.78%, surpassing the S&P 500's 3.21% earnings yield, with only one-third the risk and superior risk-adjusted returns. Long-term mean reversion and recent bond underperformance suggest BND could deliver 6-6.5% CAGR over the next decades, far outpacing stocks on a risk basis.
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This index represents a comprehensive measurement of the performance of a broad assortment of public, investment-grade, taxable, fixed income securities in the United States. It encompasses a variety of sectors, including government bonds, corporate bonds, and international dollar-denominated bonds, alongside mortgage-backed and asset-backed securities. These securities all share the common characteristic of having maturities greater than one year. The selection process for the fund's investments is carried out through a sampling method. To ensure adherence to its primary focus, at least 80% of its assets are invested in the bonds that constitute the index.
These are secure, investment-grade bonds issued by the government. They are known for their reliability and are considered a safe investment, offering returns at a lower risk compared to corporate bonds.
Issued by corporations, these bonds typically offer higher yields compared to government bonds, reflecting the greater risk associated with corporate operations and financial health.
This type of bond allows investors to gain exposure to international markets while investing in a currency that they may be more familiar with. These bonds can offer diversification benefits to an investment portfolio.
These are investments in a pool of mortgages, providing investors with periodic payments similar to bond coupon payments. They come with a level of risk that depends on the performance of the underlying mortgages.
Similar to mortgage-backed securities, these are bonds or notes backed by financial assets, other than mortgages, that provide regular payments to investors. This can include a wide range of asset types, from car loans to credit card receivables.