Exchange Traded Funds (ETFs)

ETF Talk: Hedge Volatility with VGIT Treasury Bonds

The Vanguard Intermediate-Term Treasury ETF (VGIT) is a well-regarded exchange-traded fund (ETF) that offers exposure to U.S. Treasury bonds with maturities ranging from five to 10 years. The fund is designed for investors seeking income generation and portfolio stability, making it a popular choice for those looking to balance risk in a diversified portfolio.

VGIT’s primary objective is to provide income through investments in intermediate-term U.S. Treasury bonds. By focusing solely on government-backed securities, the fund minimizes credit risk, offering a safe haven for investors during periods of market volatility. Its targeted maturity range of five to 10 years positions it to capture higher yields than short-term Treasuries, while avoiding the extreme duration risk of long-term bonds.

VGIT is composed exclusively of U.S. Treasury securities. The portfolio is organized by maturity, with most holdings falling within the intermediate duration of five to 10 years. This focus allows it to strike a balance between yield and price sensitivity to interest rate changes. Unlike other ETFs, VGIT does not include corporate bonds or other riskier fixed-income instruments, ensuring emphasis on safety and stability.

Some notable securities in VGIT’s portfolio include U.S. Treasury notes maturing in 2028, 2029 and 2030. These holdings collectively represent the core of the fund’s investment strategy, which aims to deliver predictable returns with minimal credit risk.

Over the past month, VGIT has experienced slight fluctuations, reflecting ongoing uncertainty in the interest rate environment. The fund’s one-month performance stands at approximately 1.95%, while its three-month performance is 1.38%. Year-to-date, VGIT has delivered a return of 2.53%, underlining its role as a stable, income-focused investment option.

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The chart below illustrates VGIT’s price movement over the past several months, providing a visual representation of its recent performance trends:

Chart courtesy of StockCharts.com.

VGIT can be a useful investment opportunity for conservative investors or those seeking a hedge against equity market volatility. Its relatively low expense ratio of 0.04% adds to its appeal, allowing investors to keep more of their returns. However, potential investors should be mindful of the fund’s sensitivity to changes in interest rates, which could lead to price declines in a rising rate environment.

Therefore, investors should conduct their due diligence before adding any stock or fund to their portfolio.

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 Forecasts & Strategies, Tactical Trader, TNT Trader, Five Star Trader, Bullseye Stock Trader, and The Deep Woods. 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.