March 24, 2022 | Video

Building a fixed income allocation one block at a time

Fixed income investments have long been a critical part of investors' portfolios given their historically lower volatility and differentiated return correlations relative to the equity markets, along with their potential ability to provide a steady income stream. 

Vanguard Bond ETFs: The building blocks to construct your fixed income allocation

Watch this short video to see how Vanguard Bond ETFs can help you create a variety of allocations to fine-tune interest rate risk and credit risk while getting exposure to the broad U.S. bond market.

When trying to find suitable choices for the fixed income allocation of client portfolios, you are faced with a variety of challenges. There are simply fewer options to choose from. There are also concerns about the lack of transparency and liquidity in some bond investment products. Include bond ETFs if you are looking for; transparency, liquidity, diversification, and cost.

Our bond ETFs allow you to invest in as few or as many ETFs as you see fit to complete the bond piece of your portfolio. If you're looking for broad coverage of the domestic bond market in one, low-cost investment, then our Total Bond Market ETF covers all aspects of the U.S. bond market.

BND gives you an easy way to get exposure to 100% of the U.S bond market through a single, diversified investment as it holds more than 8,000 domestic, investment-grade bonds. For greater precision, you can use our broad investment-grade ETFs—available for short-, intermediate-, and long-term—to fine-tune a portfolio's interest rate and credit risk even as you target duration for your clients' needs.

On the short end of the duration spectrum is BSV our Short-Term Bond ETF.

In the middle is BIV our Intermediate-Term Bond ETF. And BLV is our long-term bond ETF. Then to round out this "Building of the Agg" approach, you will need to include an allocation to Mortgage-backed securities through VMBS our mortgage-backed Securities ETF. This set of building blocks will provide you with 97% coverage of the total U.S. bond market.

Here are some things to consider when using bond ETFs to build out the fixed income allocation of an investor's portfolio. The longer the average maturity, the more likely you'll see prices move up and down when interest rates change. Credit quality helps assess the chance that the bond will default. The better the credit quality, the less risk there is to your investment, especially during times of economic stress. Investment-grade refers to bonds with higher ratings from rating agencies such as Moody's and S&P.

Whichever way you choose to get your bond exposure, make sure you consider Vanguard Bond ETFs.  


Building blocks that help you reduce interest rate risk as you target duration

Vanguard Short-Term Bond ETF (BSV)

Vanguard Intermediate-Term Bond ETF (BIV)

Vanguard Long-Term Bond ETF (BLV)


  • For more information about Vanguard funds or Vanguard ETFs, obtain a prospectus (or a summary prospectus, if available) or call 800-997-2798 to request one. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.
  • Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
  • All investing is subject to risk, including possible loss of principal. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
  • Bond funds are subject to interest rate risk, which is the chance bond prices overall will decline because of rising interest rates, and credit risk, which is the chance a bond issuer will fail to pay interest and principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that bond to decline.
  • Diversification does not ensure a profit or protect against a loss.