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VFSTX or LQD ?
Old 03-14-2009, 09:18 AM   #1
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VFSTX or LQD ?

I have $100k that I want to put into corporate bonds (I think Treasuries are overpriced at the moment). To avoid issuer specific risk, I am looking to a mutual fund or an ETF. At present, I am thinking about Vanguard Short Term Investment Grade Fund (VFSTX) or the LQD ishares ETF. Pros and cons of each? Alternatives? I thank you in advance.
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Old 03-14-2009, 09:20 AM   #2
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Why not Vanguard High Yield Corp?
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Old 03-14-2009, 09:22 AM   #3
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You aren't thinking of the short-term investment grade bond fund VFSUX? (Full disclosure: we own it.)

Total bond does have lots more than corporate bonds. Did you look?

I don't like ETFs for fixed income because there is no transparency in how dividends are reinvested. At least with a non-ETF regular mutual fund you are certain that dividends are reinvested at net asset value.

PS: High yield bond funds behave more like equities. Take your equity risk with equities and not with high yield bond funds.
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Old 03-14-2009, 09:37 AM   #4
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You're right about VBMFX. I was thinking of VFSTX. I need to fix my post.
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Old 03-14-2009, 09:43 AM   #5
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Total bond does have lots more than corporate bonds. Did you look?
Yup. VBMFX probably isn't the best place for someone who thinks treasuries are overvalued and is looking for corporate exposure. The index has 34% in Treasury/Agency debt and 40% in Government Mortgage Backed securities.

Also agree that VFSUX at 5% is a decent option.
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Old 03-14-2009, 09:59 AM   #6
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You're right about VBMFX. I was thinking of VFSTX. I need to fix my post.
Just to clarify LOL's post (in case it's not already obvious); since you have the 100K minimum, the Admiral shares (VFSUX) have an 11 bp lower ER.
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