How You Could Utilize Vanguard’s Low-Expense-Ratio Bond Fund

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

This week’s ETF Talk features Vanguard Total Bond Market ETF (BND), an exchange-traded fund (ETF) managed by Vanguard, the low-expense-ratio ETF provider. BND is a bond fund that also ranks as one of Vanguard’s largest ETFs, with $22.8 billion under management as of Sept. 30. With an expense ratio of only 0.08%, the costs for this fund are 91% lower than the average for similar bond funds.

BND seeks to perform like a broad, market-weighted bond index. To this end, BND tracks the results of an index that represents a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States, including government, corporate and international bonds, in addition to mortgage- and asset-backed securities with maturities greater than one year.

BND has made steady progress in 2014, rising 2.49% this year. This fund also offers income-oriented investors a dividend yield of 2.55%.

BND_110714

BND’s top 10 holdings include only 4.66% of its total assets. As a bond fund, it has no allocations to any stocks or sectors. Its second- through fifth-largest holdings are all different United States Treasury Notes, ranging from shorter-term 0.25% notes to longer-term bonds yielding 4.75%.

Bonds can be a good way to diversify a portfolio that is primarily composed of stocks, and the Vanguard Total Bond Market ETF (BND) may be worth consideration for investors interested in this diversity, as it combines short- and long-term bond holdings at a relatively minimal fee.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

In case you missed it, I encourage you to read my e-letter column from last week about Vanguard’s real estate investment trust exchange-traded fund. I also invite you to comment in the space provided below.

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As you may know, I have been a passionate advocate of ETFs for many years. That advocacy has been expressed extensively in my various publications.

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