Vanguard Long-Term Corporate Bond is an excellent choice for long-term investment-grade corporate bond exposure, thanks to a broadly diversified portfolio and rock-bottom fee. It sets a high hurdle for its Morningstar Category peers over the long run, earning it a Morningstar Analyst Rating of Gold.

The fund tracks the market-value-weighted Bloomberg US 10+ Year Corporate index, which includes U.S. investment-grade corporate bonds with at least 10 years remaining to maturity. Market-value weighting limits turnover and lowers transaction costs by investing in the largest issues. The breadth of the portfolio's holdings effectively diversifies away the credit risks of any individual issuer, giving the fund an advantage over category peers with a higher concentration of holdings.

Diversification reduces the fund's exposure to any one issuer, but it still courts significantly more credit risk than category peers in the long-term bond category. Entering February 2022, nearly 90% of its assets were invested in corporate debt rated A or BBB, while the corresponding figure for its average category rival was closer to 60%. That's because many peers invest in a variety of sectors in addition to corporate bonds, including safer issuances like Treasuries and agency mortgage-backed securities. Entering February 2023, category peers held just 51% of their portfolio in corporate bonds.

This fund takes on more interest-rate risk than its average category peer, as well. As of January 2023, its effective duration was 13.3 years, about 1.8 years longer than the category average. Market-value weighting means the fund's duration could fluctuate based on issuing activity. But the main culprit of the fund's above-average interest-rate risk is its mandate to invest only in bonds with more than 10.0 years remaining to maturity. Other category funds aren't required to follow such strict rules, leading the average fund to hold over 18% of its portfolio in bonds with less than 10.0 years to maturity.

Exposure to credit and interest-rate risk notwithstanding, this strategy accurately reflects the composition of the long-term investment-grade corporate bond market. Its annual fee is 23 basis points cheaper than the category average, making it a compelling option.

Clarification (Sept. 7, 2023): While annual fees are cheap, buyers of this strategy's mutual fund share classes are subject to a 1% purchase fee intended to minimize the impact of transaction costs on the fund. This benefits current fundholders at the expense of new investors. The exchange-traded fund version of this strategy is not subject to the purchase fee.

Analyst Rating

Diversified exposure to long-term investment-grade corporate bonds at a low cost.

Director

Bryan Armour

This expansive portfolio of long-term corporate bonds reflects the opportunity set available to active managers while limiting turnover and associated costs, allowing it to maximize its fee advantage. It merits 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 is the named manager on the portfolio. 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 exchange-traded fund team, which helps with ETF basket creation. These managers are also 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

The Vanguard Group retains a High Parent rating. 

Mutual ownership, low costs, and a direct-to-investor playbook have helped spur Vanguard's leadership within the United States. Client service missteps notwithstanding, Vanguard over the past decade has grown its market share of U.S. open-end and exchange-traded fund assets at about a 5% annualized clip. At that rate, Vanguard's portion of the U.S. industry will cross 50% around 2035.

True, some competitors can now match or even undercut Vanguard on fees for broad market exposure. But Vanguard's burgeoning advice business could help it keep or even extend that lead. Through Digital Advisor and Personal Advisor Services, Vanguard has built an increasingly compelling ecosystem of advice for investors with simple to complex needs.

Vanguard is also using its advice business to expand overseas, but that's a work in progress. Of Vanguard's USD 7.6 trillion in global assets under management in March 2023, non-U.S. investors owned less than 10%, a figure that has changed little in recent years. Strategic shifts in China and other markets account for the slow pace, including returning money to institutions that had been layering on fees. Vanguard hopes to recoup that money and more by focusing on individual investors and the advisors who serve them. Provided Vanguard sticks to its playbook, its advantages should translate into success abroad, too.

High

Parent

Vanguard Long-Term Corporate Bond ETF

VCLT tracks a market-weighted index of investment-grade fixed-rate corporate bonds with maturities greater than 10 years.

Vanguard Intermediate-Term Corporate Bond ETF

Vanguard Intermediate-Term Treasury ETF

Vanguard Long-Term Treasury ETF

The recession that many had predicted for the U.S. this year has thus far not happened. In fact, the S&P 500 is up 18% year to date as of November 17.

Seek Tax-Loss Harvesting Opportunities Within Fixed Income ETFs

Vanguard Long-Term Corporate Bond ETF delivered negative returns in the past 2 years due to aggressive interest rate hikes by the Federal Reserve. The current yield of VCLT is attractive at 6.08%, making it a good time to accumulate shares. Investors should treat any negative spikes in VCLT's fund price as buying opportunities.

VCLT: Attractive Buying Opportunity For Long-Term Investors

With money market funds yielding 5%, many advisors have been leaning on short-term money market funds. And while that 5% is great, what happens if and when that yield goes away?

Lock in Some High Yields for Longer With VCLT

Invesco Senior Loan ETF

SPDR Bloomberg Investment Grade Floating Rate ETF

iShares 7-10 Year Treasury Bond ETF

iShares 3-7 Year Treasury Bond ETF

SPDR Bloomberg High Yield Bond ETF

iShares Short Treasury Bond ETF

iShares 1-3 Year Treasury Bond ETF

SPDR Bloomberg Short Term High Yield Bond ETF

iShares 0-5 Year TIPS Bond ETF

iShares TIPS Bond ETF

iShares 10-20 Year Treasury Bond ETF

iShares 20+ Year Treasury Bond ETF

Vanguard Short-Term Corporate Bond ETF

Fixed-income investors looking for interest rate cuts from the Federal Reserve are still waiting, but that hasn't stopped low-rated bonds from posting strong gains in 2023. Bond investors hoping for encouraging signals from the Federal Reserve that its policy of raising interest rates was ending received mixed news yesterday.

Bank Loans And Junk Bonds Are Having A Good Year

iShares Floating Rate Bond ETF

iShares 5-10 Year Investment Grade Corporate Bond ETF

iShares Trust iShares 1-5 Year Investment Grade Corporate Bond ETF

iShares iBoxx $ Investment Grade Corporate Bond ETF

iShares National Muni Bond ETF

SPDR Portfolio Intermediate Term Corporate Bond ETF

SPDR Portfolio Short Term Corporate Bond ETF

iShares Broad USD Investment Grade Corporate Bond ETF

Vanguard Tax-Exempt Bond Index ETF

For many, social security isn't enough to fund their retirement needs. Bonds can help produce another income stream.

Best Bonds For Income

Vanguard Long-Term Bond ETF

Over the past 12-24 months of rate hikes, short-term and ultra-short-term bond ETFs have served income-seeking investors well. But as interest rates continue to rise, exposures farther out on the curve have begun to offer attractive yields, too.

Looking To Extend Duration? 3 Long-Term Vanguard ETFs to Consider

Vanguard ESG U.S. Corporate Bond ETF

Unless corporations are able to pull off the ultimate escape artist trick, they won't be able to get away from higher interest rates, which could put corporate bonds in a precarious position. A MarketWatch report noted a particular Goldman Sachs analysis that addressed the $1.

Corporate Bonds Could Be in a Precarious Position

Long-term bond exchange traded funds (ETFs) can offer fixed income investors higher yield options, and a pair of Vanguard funds cracked a Forbes Advisor Top 10 List of long-term bond ETFs.

2 Bond ETFs Crack Forbes Advisor List for Long-Term Exposure

VCLT is an exchange-traded fund that invests in investment-grade corporate bonds. The fund has a long duration of 13.2 years, which means that its price is sensitive to changes in interest rates. With most economists now predicting the July Fed hike to be the last one this cycle, the main risk factor for this fund is off the table.

VCLT: Long Duration Investment-Grade Bonds Look Appealing

Vanguard Extended Duration Treasury ETF

As the markets gradually recover from the banking crisis that plagued the financial world earlier this year, there is a growing sense of confidence among investors and advisors. Additionally, the unsettling issue of the debt ceiling debacle seems to have taken a back seat for now, encouraging investors to explore investment options with longer durations.

Is Now the Time to Consider Long-Term Bond ETFs?

iShares iBoxx High Yield Corporate Bond ETF

iShares 10+ Year Investment Grade Corporate Bond ETF

Blackrock US Carbon Transition Readiness ETF

As of year-end 2022, U.S. insurance companies invested $37 billion in ETFs. This represented only a fraction of the $6.5 trillion in U.S. ETF assets under management and the $7.9 trillion in invested assets of U.S. insurance companies, according to a just-released report from S&P Dow Jones Indices.

Insurers Own Large Stakes in Fixed Income ETFs

The Vanguard Long-Term Corporate Bond ETF has returned over 10% in total return terms since I last wrote on it in October, but the recent pullback is another buying opportunity. While the yield to maturity on VCLT has declined from 5.9% in October to 5.4% today, inflation expectations and equity yields have also fallen, further improving its relative attractiveness.

VCLT: Another Buying Opportunity

Long-dated corporate bonds are in trouble due to a downward-sloping yield curve, which might result in fixed-income investors shortening their portfolio durations. Although the Vanguard Long-Term Corporate Bond Index ETF has AAA exposure, most of its constituents are BBB-rated and partake in cyclical industries.

VCLT: Avoid Long-Dated Corporate Bonds

Choosing the right corporate bond ETF can be a challenge. After all, which funds are best suited to weather whatever comes our way in the new year?

How to Choose the Right Corporate Bond Fund

Following the worst year of returns since the early 1930s, I think that bonds are a great buy-the-dip opportunity. Despite holding instruments of high quality, VCLT's yield to maturity of 5.6% is a respectable 150 basis points higher than treasury yields.

VCLT: Low Octane, But Compelling At Today's Rates

2022 was a historically bad year for fixed income, with bonds having their worst annual performance since Morningstar created its fixed income indexes. But now that we're in 2023, higher interest rates and wider credit spreads have driven up yields, particularly for corporate debt.

Target Long-Term Corporate Bonds With VCLT

VettaFi's head of research Todd Rosenbluth appeared on Yahoo Finance Wednesday to chat about the Fed's latest rate hikes, as well as Morgan Stanley's new suite of six ETFs.

Todd Rosenbluth Talks Fed, FI, and Morgan Stanley ETFs

Bond markets are set to see an additional boost as the Federal Reserve is expected to raise interest rates by at least 25 basis points next week.

Target Long Duration, High Quality Fixed Income Before a Recession Hits

VanEck Vectors Intermediate Muni ETF

SPDR Nuveen Municipal Bond ESG ETF

SPDR Portfolio Long Term Corporate Bond ETF

American Century Diversified Municipal Bond

Bull vs. Bear is a weekly  feature where the VettaFi writers' room takes opposite sides for a debate on controversial stocks, strategies, or market ideas — with plenty of discussion of ETF ideas to play at either angle.  For this edition of Bull vs.

Bull vs. Bear: A Town Hall On Muni ETFs

Vanguard Total Corporate Bond ETF

After a rough year, investment-grade corporate debt appears to be making a comeback in 2023. Since the start of the year, investment-grade corporate bonds globally have gained more than 3.6%, according to Bloomberg Indexes, putting them on track for experiencing a record return for January.

Target VCLT and VTC While Corporate Debt Makes a Comeback

A reader asked for my thoughts on VCLT. VCLT is a simple long-term corporate bond index ETF. VCLT currently yields 4.3%, but yields should grow as interest rates continue to increase.

VCLT: Long-Term Corporate Bond Index ETF, Growing 4.3% Yield, Uncompelling Value Proposition

Global X U.S. Preferred ETF

Looking ahead to 2023, the regular income obtained either through preferred stocks or corporate bonds is appropriate for a low-growth economic environment. Also, the investment-grade corporate bonds of VCLT are normally considered safer than the preferred stocks held by PFFD.

PFFD Vs. VCLT ETFs: Preferreds Are Better Even If Powell Is Hawkish

Short-term bonds have been the default play for some time as the U.S. Federal Reserve's monetary tightening continues to play out, but investors could be returning to debt with longer maturity dates again, showing signs that bets are being placed on rate increases subsiding.

Fixed Income Investors Could Be Returning to Longer-Term Bonds

The Vanguard Long-Term Corporate Bond ETF VCLT now offers yields of almost 6% thanks to the surge in long-term bond yields and the slight rise in credit spreads. Yields are close to their highest levels seen since the global financial crisis, and are even at multi-year highs when measured relative to long-term inflation expectations.

VCLT: More Than One Way To Win In Corporate Bonds

The bond market in the U.S. has been heading downward for most of the year, but the situation is more dire in other parts of the globe. In South Korea, for example, risk of corporate debt default is causing the government to intervene with purchases of corporate bonds.

News for Vanguard Long-Term Corporate Bond ETF ETF (VCLT)