Best Mutual Funds Now

This is the third article in a series of Vanguard mutual fund articles here on Best Mutual Funds Now.  The last article provided a review of the Vanguard Equity Income Fund. This article will provide a Vanguard Short-Term Bond Index Fund review.

Overview of the Vanguard Short-Term Bond Index Fund:

This Vanguard Short-Term Bond Fund is a Vanguard index mutual fund.  The bond indent fund employs a an indexing strategy that will track the performance of the Lehman 1–5 Year U.S. Government/Credit Index. This Vanguard index fund invests in all of the medium and larger issues of U.S. government, investment-grade corporate bonds, and investment-grade international dollar-denominated bonds that have maturities of between 1 and 5 years and are publicly issued.

The goal is to invest in the bond that comprise the Lehman 1–5 Year U.S. Government/Credit Index in order to mirror its returns.  Vanguard promises that 80% of the fund’s assets will be invested in bonds held in the index.

Who should invest in the Vanguard Short-Term Bond Index Fund?

This mutual fund is for the investor who is looking to earn income and at the same time not experience volatility in the mutual fund price.  This is a great index fund to help you diversify your portfolio.  If your current portfolio is heavily invested in stocks, investing in the Vanguard index fund can help you with your diversification.  If you are trying to achieve long term capital growth, then this is not one the best Vanguard mutual funds for you.

What are the Vanguard mutual fund fees charged?

This Vanguard Bond Index Fund is a no-load mutual fund.  Since it is a no-load mutual fund and a Vanguard mutual fund, you can expect to pay very low management fees.  This fund has a very low 0.18% expense ratio.

To clarify what no-loan means, you will not have to pay any broker commission when you buy this fund.  You can buy it from Vanguard itself, and Vanguard does not have to pay a broker commission.  No-load mutual funds are the way to invest in mutual funds.  One of the most important factors in mutual fund performance is the fees it takes from its assets.  The higher the fees, the less of a return you will experience.

As I mentioned my previous article, Vanguard does have an account service fee of $20 per year for non-retirement accounts.  Please read the other article to learn how to avoid paying this Vanguard account service fee.

What has been the performance of the Vanguard Short-Term Bond Index Fund:

Over the past ten years the average annual returns for this bond mutual fund have been slightly less than the Lehman 1–5 Year U.S. Government/Credit Index.  Over the last ten years, this fund’s average annual returns has been 4.98%.  The 5 year average annual return was 3.30%.  So far this year the average annual returns has been 7.31%.

If you are looking for a place to invest money in the short term, this Vanguard index fund could be one of the best Vanguard mutual funds for you.  We hope that you found this Vanguard Short-Term Bond Index Fund review helpful.  As always, if you have any questions, please do not hesitate to ask them in the comments below.

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