The U.S. corporate-bond market is a deep sea with nearly $9 trillion outstanding at the end of 2017. While savvy investors with vast resources certainly have better chances of catching winners, bond investing can be a daunting task for everyday investors. Luckily, it’s easy to follow the market’s collective wisdom with a low-cost portfolio like Vanguard Intermediate-Term Corporate Bond ETF (VCIT). This fund earns a Morningstar Analyst Rating of Silver because it effectively tracks a well-constructed benchmark and enjoys a sizable cost advantage over most of its peers.
The fund tracks the Bloomberg Barclays US 5-10 Year Corporate Bond Index, which provides market-value-weighted exposure to U.S. investment-grade corporate bonds with between five and 10 years until maturity. This fund is one of the lowest-cost options in the corporate-bond Morningstar Category, and it has a strong index-tracking record. But its market-value-weighting approach leads to heavy exposure to financial-services bonds.
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Phillip Yoo does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.