Vanguard Total Bond Market ETF's (BND) Treasury-heavy portfolio may keep it from posting returns at the top of the intermediate-term bond Morningstar Category, but its low price-tag and high-credit-quality portfolio should set it up for attractive risk-adjusted performance over a full market cycle. It warrants a Morningstar Analyst Rating of Silver.
The exchange-traded fund tracks the market-cap-weighted Bloomberg Barclays U.S. Aggregate Bond Index, which includes investment-grade, U.S.-dollar-denominated bonds with at least one year until maturity. The portfolio currently consists of roughly 40% Treasury bonds, 20% government-guaranteed mortgage-backed securities, and 40% investment-grade corporate bonds. Accordingly, it carries low credit risk, which can limit its return potential. However, its cost advantage partially offsets this drawback.
Phillip Yoo, CAIA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.