|Expense Ratio (net)||0.15%|
|Last Cap Gain||0.00|
|Morningstar Risk Rating||Above Average|
|Beta (3Y Monthly)||1.02|
|5y Average Return||N/A|
|Average for Category||N/A|
|Inception Date||Dec 11, 1986|
Bill Gross’ track record as a bond fund manager has been roundly — and unfairly — criticized. Gross earlier this week announced his retirement from mutual-fund management. It’s no secret that Gross’ investment performance, while phenomenal up until 2014, thereafter took a dramatic turn for the worse and over the past four-plus years has been dismal.
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.
Vanguard index funds have long been at the forefront of passive investing and are favorites among the buy-and-hold community for building long-term portfolios.
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
The S&P 500 index fund is help up to be a great low-cost option for investors who want something simple. But investors need to diversify so what's a bond equivalent?