Think bonds are out for the foreseeable future? Think again—and meet our 2 new active bond funds: Vanguard Core Bond ETF and Vanguard Core-Plus Bond ETF.
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This just in: Our 2 new active bond ETFs
9 minute read
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December 14, 2023
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Bonds
ETFs
Active funds
Meet our new ETFs
Vanguard Core Bond ETF (VCRB) and Vanguard Core-Plus Bond ETF (VPLS) are similar to Vanguard Core Bond Fund (VCORX/VCOBX) and Vanguard Core-Plus Bond Fund (VCPIX/VCPAX), respectively, but are separate and distinct products.*
How they're similar:
- Both ETFs are designed to provide clients with fixed income holdings that are broadly diversified across a range of sectors, qualities, and maturities.
- Either ETF can serve as the centerpiece or sole allocation of fixed income in a diversified portfolio.
- Both are actively managed by Vanguard Fixed Income Group, providing the potential for outperformance.
How they're different:
- Vanguard Core-Plus Bond ETF is slightly higher risk than Vanguard Core Bond ETF. The Core-Plus Bond ETF seeks additional outperformance by investing across a wider range of market sectors and allowing the portfolio managers more flexibility in their allocation decisions.
- The primary objective for both ETFs is total return, but their secondary objectives differ. The Core Bond ETF seeks a moderate level of current income while the Core-Plus Bond ETF seeks a moderate to high level of current income.
Why should you invest?
Diversify. These ETFs (exchange-traded funds) provide broad exposure to the bond market, and either one can function as a core holding or as a complement to your other fixed income holdings.
Enjoy low costs. Our low expense ratios allow us to avoid taking unnecessary or unintended risks. See how our expense ratios measure up to their peer-group averages:
0.10% |
0.27% |
0.20% |
0.48% |
|||
VCRB estimated expense ratio |
Morningstar category average: Core (ETF) |
VPLS estimated expense ratio |
Morningstar category average: Core Plus (ETF) |
0.10% |
0.27% |
||
VCRB estimated expense ratio |
Morningstar category average: Core (ETF) |
||
0.20% |
0.48% |
||
VPLS estimated expense ratio |
Morningstar category average: Core Plus (ETF) |
Get active. Active management allows our portfolio managers to seek the best opportunities in the given market environment and navigate inefficiencies inherent to the fixed income markets while remaining risk aware. Active management also offers the potential to generate higher-than-market returns.
Make a choice. You can choose the level of risk you're comfortable with. The Core Bond ETF offers exposure primarily to U.S. investment-grade securities with modest allocations to riskier sectors. The Core-Plus Bond ETF has a slightly higher allocation to riskier sectors, such as high-yield and emerging markets, but with a potential for greater total returns.
Meet the team
Vanguard Fixed Income Group is the world's largest manager of bond mutual funds and ETFs, overseeing more than $2.1 trillion in global assets under management. Our team of portfolio managers combines Vanguard's top-down views on the economy, cycle location, policy, and market valuation with bottom-up, research-driven security selection. And our lower fees mean we don't have any added pressure to take on unnecessary risk. Our team has the luxury of choosing smart risks when good opportunities arise—and they've proven themselves time and again:
95%
of Vanguard active bond funds
outperformed their peer-group average over the past 10 years ended September 30, 2023.**
Why should you embrace bonds?
2022 was an unusual and exceptional year for bonds, but for the past 50 years, they've helped stabilize portfolios in years of negative equity returns. Bonds are now offering higher yields and an improved outlook for long-term, risk-adjusted returns. It's important to remember that bonds tend to outperform both stocks and cash in down times. By investing in a broadly diversified bond ETF, you can capitalize on the current yield for a longer period.
Now—choosing your core bond product
Interested in investing in bonds but unsure where to start? Our guidance below can help you select the core bond product that may be right for your portfolio.
Portfolio characteristics
Vanguard Total Bond Market Index |
Vanguard Core Bond |
Vanguard Core-Plus Bond |
|
Mutual fund* |
VBTLX
|
VCOBX
|
VCPAX
(Admiral Shares) VCPIX (Investor Shares) |
ETF* |
BND |
VCRB |
VPLS |
Management style |
Index |
Active |
Active |
Expense ratio |
0.03% (ETF) |
0.10% (ETF) |
0.20% (ETF) |
Vanguard Total Bond Market Index
Mutual fund*
VBTLX
(Admiral™ Shares)
ETF*
BND
Management style
Index
Expense ratio
0.03% (ETF)
0.05% (Admiral)
Vanguard Core Bond
Mutual fund*
VCOBX
(Admiral Shares)
VCORX
(Investor Shares)
ETF*
VCRB
Management style
Active
Expense ratio
0.10% (ETF)
0.10% (Admiral)
0.20% (Investor)
Vanguard Core-Plus Bond
Mutual fund*
VCPAX
(Admiral Shares)
VCPIX
(Investor Shares)
ETF*
VPLS
Management style
Active
Expense ratio
0.20% (ETF)
0.20% (Admiral)
0.30% (Investor)
Relative risk/reward
Key takeaway: Each option serves a similar role in an investor's portfolio. Which is best for you depends on your preference for active versus index funds and your overall risk tolerance.
Consider ETFs if you want expense ratios that are lower than our Investor share class, the ability to invest for as little as $1 (instead of an initial investment of $3,000 or $50,000), and control over the timing and price of your purchase.
Consider mutual funds if you'd like to set up automatic investment transactions—which you can't do with ETFs—and you want to place trades based on a fund's net asset value (NAV).
When it comes to asset allocation, bonds have proven time and again that they're an integral part of a diversified portfolio. Consider one of our new bond ETFs as a core holding or as a complement to your fixed income allocation to help you reach your long-term goals.
Vanguard Core Bond ETF
Vanguard Core-Plus Bond ETF
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*Vanguard Core Bond ETF and Vanguard Core-Plus Bond ETF are not to be confused with the similarly named Vanguard Core Bond Fund and Vanguard Core-Plus Bond Fund. These products are independent of one another. Differences in scale, investment process, and underlying holdings between the ETFs and their mutual fund counterparts are expected to produce different investment returns by the products. To obtain a prospectus for Vanguard Core Bond Fund or Vanguard Core-Plus Bond Fund, please call 800-662-7447.
**For the 10-year period ended September 30, 2023, 42 of 44 Vanguard bond funds outperformed their Lipper peer-group average. Results will vary for other time periods. Only actively managed bond funds with a minimum 10-year history were included in the comparison. Source: Lipper, a Thomson Reuters Company. The competitive performance data shown represent past performance, which is not a guarantee of future results. View fund performance
All investing is subject to risk, including the possible loss of the money you invest.
For more information about Vanguard mutual funds or Vanguard ETFs, obtain a mutual fund or an ETF prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.
You must buy and sell Vanguard ETF Shares through Vanguard Brokerage Services (we offer them commission-free online) or through another broker (who may charge commissions). See the Vanguard Brokerage Services Commission and Fee Schedules for limits. Vanguard ETF Shares are not redeemable directly with the issuing Fund other than in very large aggregations worth millions of dollars. ETFs are subject to market volatility. When buying or selling an ETF, you will pay or receive the current market price, which may be more or less than net asset value.
There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
Bond funds are subject to the risk that an issuer will fail to make payments on time and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments. High-yield bonds generally have medium- and lower-range credit quality ratings and are therefore subject to a higher level of credit risk than bonds with higher credit quality ratings.
Bonds of companies based in emerging markets are subject to national and regional political and economic risks and to the risk of currency fluctuations. These risks are especially high in emerging markets.
Diversification does not ensure a profit or protect against a loss.
Vanguard's advice services are provided by Vanguard Advisers, Inc. ("VAI"), a registered investment advisor, or by Vanguard National Trust Company ("VNTC"), a federally chartered, limited-purpose trust company.
The services provided to clients will vary based upon the service selected, including management, fees, eligibility, and access to an advisor. Find VAI's Form CRS and each program's advisory brochure here for an overview.
VAI and VNTC are subsidiaries of The Vanguard Group, Inc., and affiliates of Vanguard Marketing Corporation. Neither VAI, VNTC, nor its affiliates guarantee profits or protection from losses.
We recommend that you consult a tax or financial advisor about your individual situation.