Vanguard Short-Term Bond Index’s broad reach, market-value weighting approach, and rock-bottom fees make it a strong choice for U.S. short-term bond exposure.
The Bloomberg U.S. 1-5 Year Government/Credit Index, which underpins this fund, takes a simple but sensible approach. The benchmark sweeps in Treasuries, government-related bonds, and investment-grade corporate debt with between one and five years until maturity. It weights bonds by their market value, which channels the market's consensus opinion of each bond's relative value. The U.S. short-term bond market is reasonably efficient, making it hard to outsmart the collective market. Market-value weighting favors the issuers that borrow the most, but this fund focuses on investment-grade borrowers that have the resources to service their debt. The drawback is that bond-issuing activity influences the portfolio’s composition.
Government bonds dominate this portfolio. U.S. Treasuries constituted about 72% of the portfolio at the end of June 2023, despite a float adjustment designed to curtail Treasury exposure. The fund invests most of its remaining assets in corporate debt, which represented 27% of the portfolio at the end of June—an allocation that was 19 percentage points leaner than the average of fellow short-term bond strategies. The fund excludes securitized debt, which constituted over 27% of its average peers at the end of June 2023. This lopsided sector exposure breeds a conservative portfolio that is much less sensitive to credit risk than most.
The fund can entertain more interest-rate risk than its peers, though. Its 2.7-year average effective duration exceeded its standard peer’s 2.3 years as of June 30, 2023. So, this fund should hold up well when credit spreads widen but may languish in rising-rate environments, like when it trailed the category average by over 5 percentage points in 2022.

Analyst Rating

Very cheap.

Analyst

Ryan Jackson

Cost efficiency should make up for this fund’s shortcomings. Its Treasury-laden portfolio can fall behind when credit spreads narrow, but market-value weighting should be enough to push it ahead of most peers in the long run. It warrants an Above Average Process Pillar rating.

Above Average

Process

An experienced, well-equipped team manages all of Vanguard's fixed-income index funds, underpinning an Above Average People Pillar rating. 
Joshua Barrickman was named as manager in 2009. He has worked in investment management at Vanguard since 1999 and managed investment portfolios since 2005. In 2013, he was promoted to head of Vanguard's bond index group. 
Portfolio management at Vanguard is a team effort, so key-person risk is not a concern. Barrickman leads a team of sector specialists and portfolio managers along with an ETF team, which helps with ETF basket creation. These managers are supported by a team of traders who focus on execution, as well as a data team that checks incoming index data and helps the managers prepare for upcoming index changes. These teams free up time for the managers to focus on portfolio construction and index tracking. There's also a separate risk management team that independently monitors the managers' performance. 
Vanguard aligns managers' incentives with investors' by tying their compensation and performance evaluation to the fund's tracking error.

People

As The Vanguard Group settles on new senior leadership, it retains a High Parent rating.

Vanguard announced current CEO Tim Buckley will step down by the end of the year, marking an end to his 33 years at the firm. Historically, Vanguard has pronounced CEO retirements while simultaneously signaling who (from inside the firm) would take over. In this instance, Vanguard’s board said it will evaluate internal and external candidates in the coming months to find its next, and fifth, leader, though it also promoted CIO Greg Davis to president.

Vanguard flourished in several respects under Buckley’s leadership. Assets under management have grown by two thirds over his six years at the helm, while its asset-weighted average US fund fee ratcheted lower to 0.08% at the end of 2023. Vanguard further refined its advice business through its low-cost Digital Advisor platform and more holistic Vanguard Personal Advisor Services, and it debuted promising investment options.

Vanguard has had its share of challenges under Buckley, too. Growing its business outside the US has proved difficult, and ex US investors account for less than 10% of AUM. Between 2019 and 2023, Vanguard’s efforts to build its China business underwent dramatic shifts, with the firm ultimately abandoning plans to launch low-cost index funds there. It also ended a partnership with Ant Financial to provide advisory services to retail investors. Inside the US, customer service issues have continued to be a problem, and some of Vanguard’s newer offers, such as margin loans, seem a departure from a more-conservative approach to investing.

Vanguard retains an investor-friendly culture at its core that’s burnished by a commitment to low costs and supported by its unique mutual ownership structure and direct-to-investor playbook.

High

Parent

Vanguard Short-Term Bond ETF

BSV tracks a market-weighted index of US-government bonds, investment-grade corporate and investment-grade international dollar-denominated bonds with maturities of 1-5 years.

Vanguard Short-Term Corporate Bond ETF

In the parlance of capital markets, the higher-for-longer phrase has yet to dissipate. The economy continues to run hot and yields rise.

2 Bonds ETF Options to Ponder as Rate-Cut Expectations Fade

Vanguard Short-Term Treasury ETF

Short-term bonds can offer the investor an ideal way to mitigate credit risk via an investment-grade focus while also reducing the rate risk that longer-term bond offerings can carry. That said, Vanguard has three options worthy of considering to get short-term bond exposure.

Mitigate Credit and Rate Risk With These 3 ETF Options

Vanguard Ultra Short-Term Bond ETF

The past few years have been a boon for fixed income investors. That's because the Fed's aggressive rate-hiking strategy has been driving up yields.

Ease Rate Shift Worries With This Ultra-Short Bond ETF

Vanguard Total Bond Market ETF

BlackRock Ultra Short-Term Bond ETF

Janus Henderson AAA CLO ETF

PIMCO Enhanced Short Maturity Active ETF

Vanguard High Dividend Yield ETF

Health Care Select Sector SPDR Fund

Consider bond ETFs from Vanguard, dividends, and growth stocks as cash moves off the sidelines.

King Cash Is Being Dethroned. What to Buy Now.

A swift succession of interest rate cuts may not be in the cards for 2024. The Federal Reserve is deciding whether to hold rates steady yet again.

Consider This Short-Term ETF as Fed Holds Rates Steady

iShares Edge MSCI Min Vol Global ETF

iShares Edge MSCI Min Vol Emerging Markets ETF

iShares Edge MSCI Min Vol EAFE ETF

iSh SP US PrfSt Shs

Invesco S&P 500 High Dividend Low Volatility ETF

Invesco S&P 500 Low Volatility ETF

Utilities Select Sector SPDR Fund

Invesco S&P MidCap Low Volatility ETF

It's been a volatile few years for the stock market, and that has investors sniffing out low-volatility ETFs. Just understand their strengths and their limitations.

Best Low-Volatility ETFs for When the Market is a Roller Coaster

Vanguard Intermediate-Term Corporate Bond ETF

While the capital markets are expecting rate cuts to happen in 2024, there's no telling when the Federal Reserve will actually loosen monetary policy. That said, it may be time to take advantage of yield in short-term corporate bonds while they last.

Consider Short-Term Corporate Bonds Before Rate Cuts

Vanguard Short-Term Bond ETF offers high-quality yield with minimal exposure to credit risk and stock market volatility. BSV has a low expense ratio of 0.04% and a 30-day SEC yield of about 5.27%. BSV's unique blend of government and corporate bonds, short-term focus, and high credit quality make it a robust choice for conservative investors.

BSV: A Smart Move Amid Market Volatility

Vanguard Intermediate-Term Bond ETF

Despite the Fed's aggressive monetary tightening and the regional banking crisis earlier this year, the U.S. economy has been surprisingly resilient. Bond yields continue to rise, with long-term Treasuries at their highest level since October 2007.

Bond Yields Keep Rising as Economy Remains Resilient

Vanguard entered 2023 forecasting that a recession would hit the U.S. this year. Now, the firm has pushed out the timeline for a U.S. recession to 2024.

Consider High-Quality Bonds if a Recession Doesn't Hit This Year

iShares Core U.S. Aggregate Bond ETF

SPDR Gold Trust

iShares TIPS Bond ETF

Vanguard Materials ETF

Vanguard Small-Cap ETF

Vanguard Energy ETF

Vanguard Financials ETF

Vanguard Real Estate ETF

Vanguard Mid-Cap ETF

Vanguard Utilities ETF

Vanguard Total Stock Market ETF

Vanguard Short-Term Inflation-Protected Securities ETF

Vanguard Value ETF

Vanguard Growth ETF

Inflation above 2% has a negative impact on stock prices; the Vanguard Total Stock Market ETF has averaged poor performance during such years. Various sub-sectors of the stock market and sectors of the bond market are affected differently by high inflation. My data shows that energy, utilities, and gold stocks tend to perform well during periods of high inflation, while value category funds outperform growth category funds.

With Inflation Still High, These ETFs Will Likely Disappoint This Year

Schwab Short-Term US Treasury ETF

iShares 1-3 Year Treasury Bond ETF

The interest rates in the United States are expected to remain higher for longer.

Time for Short-Term Bond ETFs to Enjoy Solid Current Income?

Natixis Loomis Sayles Short Duration Income ETF

SPDR Portfolio Short Term Treasury ETF

BondBloxx Bloomberg Three Year Target Duration US Treasury ETF

Vanguard Short-Term Treasury Index Fund ETF Shares invest in short-term fixed-income U.S. Treasury bonds with maturities of 1 to 3 years. Government bond yields climbed in the second quarter of the year, with investors predicting further increases due to persistent signs of economic strength. VGSH stands to benefit from the persistence of the yield inversion curve along with the consistent outperformance of 2-year Treasury yields over 10-year Treasury yields.

VGSH: Now Is The Time To Own Short-Term Treasury Bonds

BSV has a lower yield and higher risk compared to ultra-safe assets like SGOV and BIL. BSV's price sensitivity to interest rates can work in its favor, but rate cuts are not expected until 2025. I rate BSV a Sell due to its unfavorable risk-reward ratio.

BSV: This Bond ETF's Risk-Reward Ratio Makes It A Sell

Despite a volatile first quarter, fixed income provided investment portfolios with stability and, as its name implies, income. But a recent analysis from Vanguard argues that, while the Bloomberg U.S. Aggregate Bond Index finished up in Q1, the time for investors to be fully risk-on isn't quite here yet.

Vanguard: We're Not Ready to Be Risk-On Just Yet

Vanguard Long-Term Bond ETF

U.S. companies announced nearly 90,000 layoffs in March, up 15% from the 78,000 announced in February and up 319% from the more than 21,000 cuts announced in the same month in 2022, according to a report released Thursday from global outplacement and business and executive coaching firm Challenger, Gray & Christmas.

Companies Announce 90,000 Layoffs in March

The Federal Reserve's latest rate hike of 25 basis points shows that its fight against inflation isn't over, but we may be getting closer to the end of the rate hike cycle. But with inflation still high and the U.S.

Consider a Defensive Approach to Fixed Income

What bond maturities should an investor be considering focusing on now: longer or shorter maturities? Every choice comes with its own risks: short-term bonds are the least risky, while longer maturities, while risky, offer better long-term potential.

Bond ETFs: Long, Intermediate, Or Short?

Amid the Federal Reserve's interest rate-hiking campaign that it kicked off in 2022, many advisors have turned to cash and cash equivalents bonds. Since cash and short-duration securities are less sensitive to interest rate increases, the strategy has worked so far.

Add More Duration to Your Portfolio

SPDR Bloomberg 1-3 Month T-Bill ETF

Vanguard Total International Bond ETF

iShares 7-10 Year Treasury Bond ETF

iShares iBoxx $ Investment Grade Corporate Bond ETF

iShares National Muni Bond ETF

iShares Short Treasury Bond ETF

iShares 20+ Year Treasury Bond ETF

Layoffs are rising. Inflation is surging.

Easy Money For Hard Times

Invesco DB Commodity Index Tracking Fund

VanEck Vectors Gold Miners ETF

Legg Mason Low Volatility High Dividend ETF

ProShares Short S&P500

Vanguard Consumer Staples ETF

Vanguard U.S. Minimum Volatility ETF

Vanguard Health Care ETF

Vanguard S&P 500 ETF

Vanguard Large-Cap ETF

Vanguard Emerging Markets Government Bond ETF

Vanguard Total International Stock ETF

Consumer Staples Select Sector SPDR Fund

Expert recommendations for choosing among the myriad of Vanguard ETFs may prove to be a valuable resource to investors, even if not all of them will prove right. I present such recommendations made by highly knowledgeable sources, along with my own recommendations and the reasons for them.

Vanguard ETFs: Recommendations For 2023

Interest rates jumped big in a few days following the bullish jobs data last week. With the Fed's Terminal Rate rising back above 5%, investors can capitalize on better yields.

BSV: A Rate Rise Is An Opportunity For Bond Investors

After a historically bad year for bonds, investors and industry insiders have become far more bullish on fixed income for 2023. Last year, falling bond prices overshadowed whatever benefits were gained from rising yields.

Target Broad-Based Fixed Income While Prices are Low & Yields Are High

While it's likely that the Federal Reserve's attempts to bring down inflation through interest rate hikes will eventually succeed, it will also lead to a worldwide economic downturn, according to Vanguard Group's 2023 economic and market outlook.

Consider High-Quality Bond Funds Before a Recession Hits

Fixed income offers investment opportunities not seen in more than a decade, particularly in investment-grade products, according to BlackRock Americas iShares Investment Strategy Head Gargi Chaudhuri. Appearing on Yahoo!

News for Vanguard Short-Term Bond ETF ETF (BSV)