Fixed income investments

Help create portfolio stability, income—and more—for your clients

OVERVIEW

Why fixed income

As an advisor, you understand the immense value that fixed income investments can provide. You also know that choosing fixed income funds that support an individual client’s goals is often a complex decision. You have to take risk tolerance, investment time frames, income goals, and market conditions into account.

We’re here to support you in those decisions so that you can allocate your clients’ fixed income funds to help:

  • Reduce the pain of stock-market downturns.
  • Preserve capital for more risk-averse clients.
  • Generate income that can compound over time to build wealth and help clients pay for expenses.
  • Lock in higher yields and soften the risk of remaining in cash if rates change.

Take advantage of a brighter outlook for bonds.

As you know, fixed income funds are powerful tools for diversifying portfolios and helping to provide income to your clients. But today’s higher rates mean the advantages of fixed income are even greater now.

After the poor returns of 2022, the improved bond outlook creates opportunities to connect with clients to discuss why they may want to add to their bond allocations and reap the benefits of this rate environment. By locking in today’s fixed income yields, you can also help shelter clients from reinvestment risk should the Federal Reserve lower rates.

While it’s always challenging to forecast rate changes, we believe higher rates are likely to last for a while. The aging population and larger fiscal deficits suggest that the neutral rate—the theoretical policy rate that would neither stimulate nor restrict an economy—has settled roughly a percentage point higher than what it was in the years after the global financial crisis.

 

The U.S. neutral rate is likely to settle at a higher level

Chart showing the change in Vanguard's estimate of the neutral rate over time. The chart shows that Vanguard believes the neutral rate is now about 1.5%, about 1 percentage point higher than it has been typically in the period after the Global Financial Crisis.

Notes: The chart depicts our estimate for the real U.S. neutral rate using our proprietary extended Laubach-Williams model; a similar pattern exists for other developed markets. If inflation were at the Federal Reserve’s 2% target and the neutral rate were 1.5%, then the neutral rate would be 3.5%.

Sources: Vanguard calculations, based on data from the Federal Reserve Bank of New York, as of June 30, 2023. More information can be found at the Federal Reserve Bank of New York.

 

“Despite the potential for near-term volatility, we believe the rise in interest rates is the single best economic and financial development in the last 20 years for long-term investors.”
 

Joe Davis portrait

Joe Davis

Vanguard Global Chief Economist

Explore fixed income subtopics

INVESTMENT OPTIONS

Find bond funds for every client need


Our lineup of active and passive mutual funds covers the spectrum of fixed income maturities, durations, credit quality, and sub-asset classes and can help you tailor fixed income portfolios to individual clients' goals.

View all fixed income funds

For clients focused on avoiding losses, these funds stick to high-quality bonds and can help manage duration risk.

These funds can help reduce losses when equities decline.

These funds strive to boost income for clients relying on cash flow from their portfolios.
Cost advantage

Help boost clients’ bottom lines

Vanguard’s low fees and commitment to funds built on enduring investment principles can help you and your clients reach their goals more quickly. We designed our company differently, with no outside shareholders.1 This enables us to keep investment costs low, improving fee flexibility for your practice and your clients to keep more of their returns. It also gives us an edge in our active funds. We don’t need to take extreme risks to lift our active returns, so you don’t have to worry about surprises.

Choose a manager with deep experience

Competitive fees are only one driver of our returns. Since our founding in 1975, we’ve continuously honed our active strategies and indexing techniques, expanded our team and lineup, and gained the knowledge that comes from decades of managing in every kind of market.

70+

Fixed income funds

190+

Members of fixed income team

16

Offices around the world

4

New fixed income ETFs, two active, launched in the last year.

Data as of June 30, 2024.

COST ADVANTAGE

Help boost clients’ bottom lines

Vanguard’s low fees and commitment to funds built on enduring investment principles can help you and your clients reach their goals more quickly. We designed our company differently, with no outside shareholders.1 This enables us to pass along economies of scale, which helps us keep our investment costs low, improving fee flexibility for your practice and helping your clients to keep more of their returns. It also gives us an edge in our active funds: We don’t need to take extreme risks to lift our active returns. 

Choose a manager with deep experience

Competitive fees are only one driver of our returns. Since our founding in 1975, we’ve continuously honed our active strategies and indexing techniques, expanded our team and lineup, and gained the knowledge that comes from decades of managing in every kind of market.

70+

Fixed income funds

190+

Members of fixed income team

17

Offices around the world as of February 29, 2024

4

New fixed income ETFs, two active, launched in the last year.

SUPPORT YOUR PRACTICE

Get support for your practice

ETFs

With more than $2.8 trillion in ETF assets under management, including $445 billion in fixed income, we’re one of the largest ETF providers in the world.4 Our traders and sales team can help you identify client opportunities and dig into the details of how bond ETFs work. You can also monitor the ETF market with our quarterly report on cash flows and other ETF trends.

Active fixed income

You may know us best for our index funds, but we’ve been managing active fixed income investments since our founding in 1975. Our quarterly report, Active Fixed Income perspectives, provides insights on every sector of the bond market.

Market and portfolio perspectives

Every month, you'll get ideas for fine-tuning clients' portfolios and updates on the markets from our fund managers and analysts in our quarterly publications, Market perspectives and Portfolio perspectives.

Timely insights
 

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Tools and resources

Use our tools for reliable, unbiased data for Vanguard and non-Vanguard products. Include ETFs and mutual funds from any fund family. Independent analysis by Morningstar provides unbiased results.

 

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Portfolio analytics

Create and evaluate the fixed income portion of client portfolios. Analyze hypothetical performance risk statistics, country diversification, asset allocation, compare two portfolios side by side, and more.

Explore analytics
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Compare products

Easily compare up to five fixed income products in a convenient side-by-side layout. Generate custom, client-ready PDFs and easily email the online comparisons.

Compare products

Resources

DOWNLOAD

  • PDF

    Getting back into bonds: Choosing the right strategy

    This analysis from Vanguard’s Investment Advisory Research Center (IARC) compares the effectiveness of an immediate lump-sum investment with dollar-cost averaging or waiting in cash to invest in the future.

  • The enduring power of bonds

    You can share this brochure with clients to help them understand that reinvestment of interest income and compounding are much bigger drivers of bond returns than price changes. This awareness can help them worry less during bond market downturns.

FAQ

Get answers on fixed income investments

Compared to mutual funds, ETFs offer greater liquidity, transparency, and tax efficiency. ETF costs are often lower overall than mutual funds, but that is largely because most ETFs are index products, which generally have lower fees than active funds. Increasingly, however, more companies are offering both index and actively managed ETFs.

Actually, the first fund we ever offered, Wellington Fund, is an active fund that invests in stocks and high-quality bonds. We’re proud to have popularized index funds and continue to believe in them because they provide diversified broad market exposure at low cost. But active funds can play an important role for many clients, especially those who have a greater appetite for risk and an interest in outperformance. Active funds can also be a savvy choice for specific client goals. Active municipal bonds, for example, can help your higher-income clients generate income and lower their tax bills.

You don’t have to choose between them. Many of our advisor clients add both Vanguard active and index funds to clients’ portfolios. Another option is to use our index ETFs for active portfolio tilts. Generally, we believe active funds are best suited for your clients with a taste for alpha and ability to tolerate the accompanying risk.

Bond laddering with individual bonds can be a smart strategy for managing changing interest rates, but bond funds can achieve the same goal at lower cost, with greater diversification and ability to maintain portfolio risk profiles than a ladder built with individual fixed income securities. While it’s a common belief that holding bonds to maturity can avoid losses, the return profiles of a laddered portfolio of individual bonds and a fixed income fund should be similar.

Ready to explore our fixed income lineup?

View all fixed income funds

Have questions about fixed income? Contact us.

800-997-2798


Disclosures and footnotes

All investing is subject to risk, including possible loss of principal. 

For more information about Vanguard funds or Vanguard ETFs, view detailed product information or call 800-997-2798 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.

1 Vanguard is owned by its funds, which are owned by Vanguard’s fund shareholder clients.

2 The Morningstar Medalist Rating combines human and algorithmic research. The rating reflects a Morningstar analyst’s conviction that a fund will outperform peers on a risk-adjusted basis. It includes three positive ratings—Gold, Silver, and Bronze.

  • Gold-rated funds rank in the top 15% of their category with expected positive net-of-fee alpha.
  • Silver-rated funds rank in the next 35% of products with expected positive alpha.
  • Bronze funds in the bottom 50% of products that are predicted to have positive alpha.

Morningstar employs more than 100 analysts to analyze Morningstar data and fund documents and, when possible, conduct face-to-face interviews with the fund management team. Morningstar analyst ratings take three pillars into account: 1) The People Pillar analyzes the person who manages a fund and considers characteristics such as relevant investment experience and length of tenure. 2) The Process pillar reflects how well managers execute their investment strategy over time. 3) The Parent pillar reviews the stewardship quality of a firm, including characteristics such as the quality of the product lineup and alignment of investor and firm interests.

3 For the 10-year period, 42 of 44 bond funds outperformed their peer group averages as of June 30, 2024; results will vary for other time periods. Only funds with a minimum 10-year history were included in the comparisons. (Source: LSEG Lipper) Note that this competitive performance data represents past performance, which is not a guarantee of future results, and that all investments are subject to risks. For the most recent performance, visit our website at advisors.vanguard.com/investments/all.

4 Vanguard data as of June 30, 2024.


Diversification does not ensure a profit or protect against a loss.

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.

Although the income from a municipal bond fund is exempt from federal tax, you may owe taxes on any capital gains realized through the fund's trading or through your own redemption of shares. For some investors, a portion of the fund's income may be subject to state and local taxes, as well as to the federal Alternative Minimum Tax.

Morningstar data © 2024 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.