Vanguard’s Low-Expense-Ratio Bond Fund

This week’s ETF Talk features Vanguard Total Bond Market ETF (BND), an exchange-traded fund (ETF) managed by Vanguard, the low-expense-ratio ETF provider. BND is a bond fund that also ranks as one of Vanguard’s largest ETFs, with $22.8 billion under management as of Sept. 30. With an expense ratio of only 0.08%, the costs for this fund are 91% lower than the average for similar bond funds.

BND seeks to perform like a broad, market-weighted bond index. To this end, BND tracks the results of an index that represents a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States, including government, corporate and international bonds, in addition to mortgage- and asset-backed securities with maturities greater than one year.

BND has made steady progress in 2014, rising 2.49% this year. This fund also offers income-oriented investors a dividend yield of 2.55%.

BND’s top 10 holdings include only 4.66% of its total assets. As a bond fund, it has no allocations to any stocks or sectors. Its second- through fifth-largest holdings are all different United States Treasury Notes, ranging from shorter-term 0.25% notes to longer-term bonds yielding 4.75%.

Bonds can be a good way to diversify a portfolio that is primarily composed of stocks, and the Vanguard Total Bond Market ETF (BND) may be worth consideration for investors interested in this diversity, as it combines short- and long-term bond holdings at a relatively minimal fee.

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