17,375 Bonds to Buy Now!
This index fund provides broad fixed-income exposure for cheap.
Russel Kinnel: Looking to add some fixed income to your portfolio? Can I interest you in 17,375 bonds?
Vanguard Total Bond Market Index Fund VBTLX delivers a 17,375-bond portfolio for just 3 or 4 basis points of your investment dollars. It’s available in open-end and ETF forms. We’ve done research that shows that actively managed funds have a pretty high success rate in fixed income. So, why bother with an index fund? Well, this fund tracks the Bloomberg US Aggregate Float Adjusted Index, which is market-cap weighted. That means you get exposure to the biggest issuers, and a large part of that is Treasuries, government-backed mortgage debt, and other high-quality debt.
That’s not where the actively managed funds are really adding value, however. So, you can get your exposure to this part of the market for cheap and then buy actively managed funds dedicated to high yield, bank loans, investment-grade corporate, or foreign debt. Thus, you let active managers work where they’re most useful, and you aren’t paying active fees for your Treasury exposure.
Watch 3 Funds That Could Get Smoked for more from Russel Kinnel.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
United States