Vanguard Short-Term Bond ETF Offers Sustainable Income

This week’s featured exchange-traded fund (ETF) is Vanguard Short-Term Bond ETF (BSV).

As its name implies, BSV tracks shorter-term U.S. government, investment-grade corporate and investment-grade international dollar-denominated bonds. All of the bonds in BSV’s portfolio have maturities in the duration range of 1-5 years.

With $21.59 billion of total assets under its belt and daily trading volume over $112 million, BSV is a huge fund with a lot of liquidity. The fund is passively managed using index sampling. Its efficient management practices yield a low expense ratio of just 0.07%.

One of the main advantages that this shorter-term bond ETF offers over the long-term bond ETFs is reduced fallout from the Fed’s interest rate hikes, which are expected by many forecasters later this year.

You may be interested to know that BSV is held by many large investment banks, such as Bank of America (19.55 million shares), Wells Fargo & Company (14.94 million shares) and Morgan Stanley (8.02 million shares). Banks do this to diversify their portfolios and hedge against interest risk.

From the chart below, we can see that BSV experienced a sharp decline in late 2016, as it dropped to a low of around $78.75. Since then, the fund has rebounded and currently trades at around $79.80. Year to date, BSV’s return is 0.48%. BSV has a dividend yield of 1.59%.

BSV’s top five holdings in the portfolio are the U.S. Treasury 1.25% Note, 1.49%; U.S. Treasury 1.375% Note, 1.46%; U.S. Treasury 1.25% Note, 1.42%; U.S. Treasury 1.5% Note, 1.39%; and U.S. Treasury 1.125% Note, 1.35%.

BSV provides constant current income with high credit quality. If you are seeking a safe go-to investment in the bond market, I encourage you to look into Vanguard Short-Term Bond ETF (BSV) as a potential purchase.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.