3 / 5 Stars
3 3 5 5 4
Zacks Investment Research
Standard & Poor's
4 / 5 Stars
#36 in Short-Term Bond
U.S. News evaluated 120 Short-Term Bond Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.
The fund has returned 0.62 percent over the past year, 1.69 percent over the past three years, 2.68 percent over the past five years, and 3.28 percent over the past decade.
|Trailing Returns||Updated 01.31.2014|
|Year to date||0.5%|
|3 Years (Annualized)||1.7%|
|5 Years (Annualized)||2.7%|
|10 Years (Annualized)||3.3%|
The Vanguard Short-Term Bond Index Fund is a passively managed index fund that tracks the Barclays Capital 1-5 Year U.S. Government/Credit Bond Index.
As of February 05, 2014, the fund has assets totaling $34.71 billion. Its portfolio consists of bonds held by its target index, which is comprised of investment-grade bonds with maturities of one to five years.
While mirroring an index in the debt-securities market is no easy task, this fund has "bonded" quite nicely with its target recently. This has traditionally led to solid performance, like in 2008, when its Barclays Capital 1-5 Year U.S. Government/Credit Bond Index capitalized on the strength of treasuries while avoiding the riskier bonds that were crushed during the downturn. Still, the fund's conservative leanings could put a damper on returns during strong markets. Meanwhile, there are some lingering questions about the short- and long-term viability of its index. Says Morningstar, "Ballooning deficits coupled with the effective nationalization of Fannie Mae and Freddie Mac mean that the government portion of the index is right now in the process of exploding in size." Before the recession, the fund's index was known as the Lehman Brothers 1-5 U.S. Government/Credit Index. The name changed after Barclays Capital purchased a chunk of the failing Lehman Brothers in 2008. The fund has returned 0.62 percent over the past year and 1.69 percent over the past three years.
The fund has a track record of solid performance, but with a few blips. In 2002, the shakeup in the credit market proved difficult for the fund, which fell significantly out of synch with its index. Shortly afterward, thanks to reductions in sectors that had been overweighted in the portfolio and a focus on diversification, the fund regained its rhythm and has since enjoyed a long stretch of good returns relative to its index. The fund has returned 2.68 percent over the past five years and 3.28 percent over the past decade.
"The fund employs a 'passive management'—or indexing—investment approach designed to track the performance of the Barclays Capital U.S. 1-5 Year Government/Credit Bond Index," according to its prospectus. "The fund invests by sampling the index, meaning that it holds a range of securities that, in aggregate, approximate the full index in terms of key risk factors and other characteristics."
Role in Portfolio
Morningstar calls it a "core" holding.
Gregory Davis is at the helm of this passively managed fund.
Vanguard Short-Term Index Fund has an expense ratio of 0.20 percent.
This fund tries to play it safe.