Executive Summary: Vanguard offers more cash-alternative and short-term bond funds than any investor needs. I walk through the field and land on two favorites, including a newcomer that's earned the top spot for the long run.
More choice doesn’t always lead to better outcomes.
It’s a lesson Vanguard’s product development team, which has been cranking out new bond funds with gusto, hasn’t learned. I track 79 funds in my Performance Review—28 of them have launched in the past 3 years.
I don’t blame anyone who looks at that list and throws their hands up. That’s where The IVA comes in—to help you cut through the noise to find the right fund for your portfolio.
Over the past two weeks, I've given you frameworks for the two fundamental questions every bond investor has to answer: Who they’re lending money to, and for how long.
But answering those still leaves work to do. Decide a short-maturity bond fund is right for you, and you’ve got 7 funds to choose from at Vanguard—not counting its ultra-short options.
Over the next few weeks, I’ll share my take on Vanguard’s bond funds. This week, I’ll cover Vanguard’s “core” bond funds in two parts. Today, I’ll look at cash alternative and short-maturity funds. On Thursday, you’ll get my take on Vanguard’s intermediate- and long-term bond funds.
In the weeks ahead, I’ll turn to Vanguard’s specialty and foreign bond funds, then the firm’s municipal bond funds.
Note: I’m setting Vanguard’s Target-Maturity Corporate Bond ETFs aside—they only launched in March, and I see them as tools for solving specific problems rather than a piece of a diversified long-term portfolio. My deep dive into them is here.
At first glance, the IVA Portfolios skip Vanguard’s “core” bond funds entirely, owning Federal Money Market (VMFXX) and Total World Bond ETF (BNDW) instead. But the global fund fits the bill as a diversified, high-quality portfolio in its own right—half its assets sit in Total Bond Market ETF (BND)—and cash reliably provides ballast.
I’ve taken a different path to building my bond sleeve than in years past, but the goal is still to offset stock market risk. And it doesn’t mean there aren’t excellent options among Vanguard’s more traditional investment-grade bond funds.
So, let’s get to it.