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Old 01-11-2016, 05:49 PM   #21
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I own the Vanguard Total Bond Index Fund as my only bond position. When I run the portfolio analyzer on the Vanguard website it flags my bond holdings with a caution icon, saying "Your bond holdings are moderately weighted toward long-term bonds, which typically provide higher yields but decline more sharply in value when interest rates rise." This agrees with others' comments above and it seems the long-term bond bias is built into the index.

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Old 03-11-2016, 02:21 PM   #22
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Just noticed today that Vanguard has announced a broad-based managed bond fund.

Vanguard Core Bond Fund will offer broad exposure primarily to the U.S. fixed income market, and can serve as a low-cost, core holding for investors who prefer active management. The fund is designed to provide a transparent, risk-controlled option, especially in comparison with many competitor funds. Some bond funds use active investment approaches that may introduce significant exposure to high-yield bonds1, reducing the diversification benefits many investors want. The Vanguard Core Bond Fund limits exposure to these high-yield bonds to 5% of its holdings.

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Old 03-11-2016, 02:39 PM   #23
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Originally Posted by jkern View Post
This index fund only has a Morningstar rating of 3 stars. Is this anything to be concerned about or is there a better choice?
It's a vanguard bond fund. Which means it's likely best in category (or very close to the best) for what it claims to do: index the entire bond market at lowest cost.

You need to decide if that is what you want.

As others have mentioned, you may want to look at duration and sec yield. Some other reasons to like or not like the bond fund is that it only has 60% in government bonds -- some people want more government (i.e. 100% treasuries for their bond portion), some people want more corporate. The total bond fund also has something like 20% in mortgage backed securities, again, you need to decide if you want to have that in your portfolio. If what I'm writing makes no sense to you, then it may help to read a book on bonds.

FWIW I have a chunk in vanguard's total bond fund. Not because I necessarily like everything in it, or feel that it's optimal but rather I feel it's "good enough" and comes with a super low expense ratio. Also sometimes you don't have much choice in funds especially in retirement accounts.

In addition to total bond, I also have bond money in short-term corporate and CDs. I'd also invest in TIPS if real yields ever rise enough above 0.

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