Fixed income model portfolios
Learn how to match the right fixed income models with different client needs
Capital Preservation
Using fixed income to preserve capital
The Vanguard Fixed Income Capital-Preservation Model is for clients who prioritize safeguarding their capital above all else. They seek protection from market fluctuations in order to preserve their principal. This portfolio combines short-term credit, intermediate- and short-term Treasuries, and cash reserves to help minimize volatility while aiming to provide modest returns that may help offset inflation over time.
Explaining low-risk bond allocations to clients
Explain to your clients that the goal of this approach is to maintain their sense of financial security. Emphasize that while higher-quality, shorter-term fixed income instruments may generate lower returns, they can help protect clients’ peace of mind. These instruments help to minimize portfolio volatility and ensure that client capital remains available as needed.
Simplify with our Vanguard Fixed Income Capital-Preservation Model
Possible allocations:
Risk Diversification
Fixed income models to manage market volatility
The Vanguard Fixed Income Risk-Diversification Model can suit clients who are concerned about volatility, don’t want to risk spending down their principal, and are comfortable with lower potential returns from fixed income in exchange for a hedge against equity market downturns. This portfolio offers high-quality bonds that pair well with traditional equities or separately managed accounts.
Explaining how bonds help diversify risk
Using this fixed income model, you can address client anxieties by emphasizing that high quality fixed income investments, such as Treasuries, core bond, and mortgage backed securities, often move in the opposite direction of equities when the stock market sells off.
Simplify with our Vanguard Fixed Income Risk-Diversification Model
Possible allocation:
Total Return
Fixed income models for those comfortable with more risk
The Vanguard Fixed Income Total-Return Model and Vanguard Fixed Income Active Total-Return Model can be for clients who are comfortable with higher volatility if it means an opportunity for higher returns. It combines higher-quality Treasury and core bonds and lower-credit-quality high-yield bonds with other asset classes for diversified returns.
Explaining fixed income diversification and total return
When talking to clients about low-risk bond allocations, focus on their need for financial security. You can explain that while shorter-term, high-quality bonds may offer lower returns, they’re designed to reduce volatility to keep their investments secure and accessible. This approach can help clients feel more confident in the stability of their portfolio.
Simplify by using our model: Vanguard Fixed Income Total-Return Model and Vanguard Fixed Income Active Total-Return Model.
Possible allocation:
Income
Bond allocations for income dependent investors
This investment concept can be for clients who need bond income to meet their spending needs. To accomplish this, allocate to bonds with greater credit exposure, which can include diversified active bond funds, emerging markets, high-yield, and active multisector, among others. This model portfolio is coming soon in 2025.
Explaining how bonds help meet income needs
Clients should be reassured that having a steady income stream in the portfolio can relieve the pressure of having to sell equities to fund spending. It’s important to set client expectations that the opportunity to generate more income comes with the possibility of higher variable returns.
Stay tuned for our income focused fixed income model available later this year
Possible allocations:
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Disclosures and footnotes
For more information about Vanguard funds, 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 possible loss of principal. 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.
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.
Vanguard does not, and will not, make any representations about whether a model portfolio is in the best interest of any investor, is not, and will not be, responsible for the determination of whether a model portfolio is in the best interests of any investor; and is not acting as an investment advisor to any investor. It is the investment advisor's responsibility to determine the appropriateness of the model portfolios, or any of the securities included therein, for any client.
The Vanguard model portfolios are provided for illustrative and educational purposes only. The Vanguard model portfolios do not constitute research, are not personalized investment advice or an investment recommendation from Vanguard to any client of a third party financial professional and are intended for use only by a third party financial professional, with other information, as a resource to help build a portfolio or as an input in the development of investment advice for its own clients. Such financial professionals are responsible for making their own independent judgment as to how to use the Vanguard model portfolios.
Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.
These risks are especially high in emerging markets.