When will the Fed cut rates? Find out how Vanguard Ultra-Short Bond Fund can help soften the blow
Product News
|May 23, 2024
Product News
|May 23, 2024
There’s a lot of uncertainty about when interest rates will start their decline. Will the Fed make multiple cuts this year? Or will a hot economy and persistent inflation put a damper on those plans?
Amid all the questions, clients may feel like their safest option is to remain in cash or money market funds, where rates remain relatively high. That feeling of safety, however, may come at a cost. When rates start falling, they often plummet. Waiting may put clients at risk of missing an opportunity to reinvest now when yields remain near levels we haven’t seen in decades. And trying to time the market is a no-win game.
For clients who are reluctant to move away from cash, you may want to nudge them to extend duration with an ultra-short bond fund or ETF, such as the Vanguard Ultra-Short Bond ETF (VUSB). Even with today’s inverted yield curve, VUSB can offer similar yields to money market funds while allowing investors to lock in higher yields for longer—roughly 1-year duration. We believe VUSB can offer value in a variety of potential economic scenarios.
VUSB can also play multiple roles in your clients’ portfolios:
Different ultra-short funds can vary significantly in where they are invested across the curve and in the types of debt in which they invest. Some focus solely on government debt, others on credit. Some are very short-term, while others have more duration. VUSB focuses on high-quality credit and:
VUSB’s expense ratio is 0.10%, compared to 0.41% for the Morningstar peer average as of February 29, 2024.
As one of the largest managers of bond funds, you’ll get:
*Source: Vanguard
For more information about Vanguard funds or ETF Shares, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. 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 the possible loss of the money you invest.
Vanguard is owned by its funds, which are owned by Vanguard’s fund shareholder clients.
Diversification does not ensure a profit or protect against a loss.
Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments.
This article is listed under