Q:

What are the benefits and features of Vanguard bonds?

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Quick Answer

Vanguard does not sell individual bonds, but it does offer Vanguard bond funds. The funds provide investors with stability and flexibility when added to investment portfolios, according to Vanguard’s website. Investors use Vanguard bond funds to help offset the risk associated with stock mutual funds and to generate additional income.

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Full Answer

Vanguard bond funds provide investors with consistency in an otherwise inconsistent stock mutual fund investment environment, explains the company. Since Vanguard bond funds hold thousands of bonds in one fund, investors receive more diversification from the bond funds, with minimized risk exposure compared to individual bonds or stock mutual funds.

Vanguard bond funds work in the same way as mutual funds in that investors put their money into a pool, and professional fund managers use the proceeds from the pool to invest in opportunities that represent the objectives of the funds, states Fidelity Investments. Professional Vanguard bond fund managers invest in short-term bonds if the fund’s objective is to meet short-term income goals, or they invest in long-term bonds, such as 30-year Treasury bonds, if the fund’s objective is to meet long-term income goals. The benefit here with bond funds is that professional fund managers allocate the money, whereas investors who purchase individual bonds must make investment decisions on their own.

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