|Expense Ratio (net)||0.15%|
|Category||Intermediate Core Bond|
|Last Cap Gain||0.00|
|Morningstar Risk Rating||Above Average|
|Beta (3Y Monthly)||1.01|
|5y Average Return||N/A|
|Average for Category||N/A|
|Inception Date||Dec 11, 1986|
Stock investors love the Fed's apparent willingness to cut short-term interest rates. The yield on five-year certificates of deposit dropped to 1.39% as of June 21, says Greg McBride, chief financial analyst at Bankrate.com. Banks are pre-emptively cutting CD yields to protect themselves in case the Fed moves rates lower, McBride says.
Stock-market volatility is back. Investors looking for safety are turning to bond ETFs. They hope these fast-growing ETFs offer shelter if the stock market further falters or begins to decline.
Friday's column noted that, for the first time ever, Vanguard Total Bond Market Index VBMFX lags its actively managed rivals over the long term. From its 1986 inception, the fund had always beaten the trailing 10-year average return for intermediate-term bond funds. As suggested by the performance discrepancy, Total Bond Market is an unusual index fund, in that it differs meaningfully from its active competitors.
Morningstar's Miriam Sjoblom caught my attention. For the first time in since forever, she surmised, the 10-year average return for intermediate-term bond funds was above that of Vanguard Total Bond Market Index VBMFX . As shown below, until this summer, Vanguard Total Bond Market Index had beaten its actively run competitors in every trailing 10-year period since December 1999.
As with the other portfolios, I used Morningstar's Lifetime Allocation Indexes to guide the asset-class exposures for these Vanguard portfolios. To help populate the portfolios with specific funds and monitor them on an ongoing basis, I leaned on Morningstar's Medalist ratings and input from Morningstar's analyst team.
Because of their ultralow costs and broad diversification, various Vanguard funds featured heavily in my previous model bucket portfolios, both the original series as well as the ETF and tax-efficient series that came later. In part, that's because these portfolios are designed for tax-deferred accounts, so managing for tax efficiency--a big benefit of equity index funds and ETFs--is not valuable here.
E*TRADE is the only major online broker to offer Vanguard mutual funds within its no-load, no-transaction-fee program