Need an Intermediate Corporate Bond ETF? Look no further than VCIT

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IExposure to intermediate bonds gives fixed income investors the Goldilocks option in terms of duration, neither too long nor too short. Enter the Vanguard Interim-Term Corporate Bond ETF (VCIT).

Corporate bonds can give bond investors more yield, but more risk, so if something beyond a 10-year maturity doesn’t match an investor’s risk profile, VCIT is ideal for this type of targeted exposure. Additionally, VCIT presents a viable option for investors who still want higher yields than short bonds can offer.

“Intermediate or medium-term debt is classified as debt with a maturity of two to ten years,” says Investopedia. “Typically, the interest rate on these debt securities is higher than that of short-term debt of similar quality but lower than that of long-term bonds of comparable rating. The interest rate risk on medium-term debt is higher than that on short-term debt. debt securities but lower than the interest rate risk on long-term bonds. “

VCIT seeks to track the performance of a market-weighted corporate bond index with a medium-term dollar-weighted average maturity. The fund uses an index investment approach designed to track the performance of the Bloomberg Barclays US 5-10 Year Corporate Bond Index, which comprises taxable, investment grade, fixed rate, US dollar denominated securities issued by industrial, utility and financial companies. companies, with maturities of between 5 and 10 years.

Product summary via Vanguard website:

  • Seeks to provide a moderate and sustainable current level of income.
  • Invest primarily in high quality corporate bonds (investment grade).
  • Moderate interest rate risk, with an average dollar-weighted maturity of 5 to 10 years.

Short or long term targeted duration bonds

Investors looking to tailor their bond allocation to short or long duration have other options with Vanguard. Short duration can hedge interest rate risk, while long duration can help bond investors earn more yield.

For a short time, there is the Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH), which seeks to track the performance of a market-weighted corporate bond index with a short-term dollar-weighted average maturity. The fund uses an index investment approach designed to track the performance of the Bloomberg Barclays US 1-5 Year Corporate Bond Index.

A long-term option includes the Vanguard Long-Term Corporate Bond Index Fund ETF Shares (VCLT). The fund seeks to track the performance of a market-weighted corporate bond index with a long-term dollar-weighted average maturity.

The fund uses an index investment approach designed to track the performance of the Bloomberg Barclays US 10+ Year Corporate Bond Index. This index includes high quality, fixed rate, taxable US dollar denominated securities issued by industrial, utility and financial companies with maturities greater than 10 years. Under normal circumstances, at least 80% of the fund’s assets will be invested in bonds included in the index.

For more news, information and strategy, visit the website Fixed income channel.

Learn more at ETFtrends.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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