For my own reasons, I am interested in switching out of Vanguard's BSV ETF and out of their VFSTX open-ended fund and would like recommendations for close equivalents (either ETF or "regular" funds).
-- Rich Carreiro snipped-for-privacy@rlcarr.com
Do you mean specifically short-term investment grade bonds or are you more interested simply in lower-risk, dividend-paying investments?
Are there any issues with respect to taxes (ie. a preference for or against muni bonds?)
Or would you want, say, less exposure to, say, treasuries?
That all said, as far as short-term investment grade bonds go, the Vanguard fund is about as good as it gets - well-managed and low-cost, and while I do like indices for this asset class - I don't think there's much risk-adjusted added return that active management can bring to this space beyond basic asset allocation choices (ie. perhaps less treasuries and more corporates right now for example), Vanguard's non-index fund has been handled well, and they do it cheaply.
BSV (which is an index fund) is currently more than 56% treasuries and 21% corporates, while the actively managed VFSTX is 50% corporates, plus some foreign corps and only a couple of percent treasuries.
Morningstar's recommendations for investment-grade short-term bonds are the Vanguard index one (not the one you noted above but rather the open-ended version of BSV, which is VBISX) and T. Rowe Price's fund PRWBX.
If you want to go a little bit shorter in duration (for less interest-rate sensitivity) and more into corporates (mostly for some more yield, but with some spread exposure), you could look at iShares Barclays 1-3 year credit bond index ETF (CSJ). It's got nice low expenses and it's tracking a good index. It's currently 66% US Corporates, 27% foreign corporates and the rest is a smattering of foreign government and US agency bonds, with pretty much all of it investment-grade. Vanguard's got their own similar ETF with short-term corporates, too, but it's only very recently started and while they've gathered assets pretty quickly, it's still much smaller than the iShares one. Vanguard's is VCSH and its expenses are 0.15%.
There are also several similar indices which stay only within government and/or treasuries, too, of course.
There is even a short-term TIPS ETF, too, which Pimco just started up recently (STPZ).
Anyway, as Skip said, without knowing more about what specifically you're looking for, it's impossible to make a great recommendation. These aren't exact equivalents, but they are in a pretty close asset class (short-term investment-grade).
Hope that helps.
On a related note, there's been a big runup not only in treasuries but also in TIPS. There was a treasury auction yesterday and demand for TIPS was so high that they sold $10billion of 5yr TIPS at a *negative* yield.
Investment-wise, I'm fine with the funds. I have wholly non-financial reasons (not appropriate for discussion in this forum) to desire to divest from Vanguard. So I'm simply looking for close-as-possible substitutes to those two funds.
And thanks for the ideas!
-- Rich Carreiro snipped-for-privacy@rlcarr.com
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.