Short Term Taxable Bonds are bonds of short duration.
There are several very similar investment options available. Which is
best?
All of the options discussed here will likely have very similar performance
and will get the job done quite well. You can't go far wrong choosing any
of the options listed here. The funds are listed in rough overall
order of preference.
It is generally most prudent to use taxable bonds in retirement accounts. So we
only list preferences for retirement accounts. For taxable accounts
consider Short-Term Tax-Exempt Bonds.
For a listing of our preferences in other asset classes, see
here.
Retirement Accounts (i.e., tax-deferred or tax-exempt accounts)
 | Vanguard Short-Term Investment-Grade Fund Admiral Shares (VFSUX).
E/R: 0.11%. Minimum initial investment = $50,000. This fund principally invests in investment grade corporate
bonds of short duration.
|
| Vanguard Short-Term Corporate Bond Index ETF (VCSH).
E/R: 0.15%. This ETF tracks the Barclays
Capital US 1-5 year Corporate Bond Index. This fund is a different share
class of the Vanguard Short-Term Corporate Bond Index Fund Signal Shares (VSCSX)
and the Vanguard Short-Term Corporate Bond Index Fund Institutional Shares (VSTBX). For
more information on ETFs, see here.
|
| DFA Five-Year Global Fixed Income Portfolio (DFGBX). E/R: 0.28%.
This fund's "variable maturity" strategy should somewhat increase
risk-adjusted returns. While it contains some foreign bonds, the
currency risk is always 100% hedged. We have only a slight preference
for DFGBX over DFGFX. DFGFX has a lower expense ratio, but DFGBX has
more room for the "variable maturity" strategy to operate over (which should
allow it to be more effective).
|
| DFA Short-Term Extended Quality Portfolio (DFEQX). E/R: 0.22%.
This fund's "variable maturity" strategy should somewhat increase
risk-adjusted returns. While it contains some foreign bonds, the
currency risk is always 100% hedged. This fund extends into the lower
part of the "investment-grade" universe regarding credit ratings of its
issuers. We have only a slight preference for DFEQX over DFGFX.
|
| DFA Two-Year Global Fixed Income Portfolio (DFGFX). E/R: 0.18%.
This fund's "variable maturity" strategy should somewhat increase
risk-adjusted returns. While it contains some foreign bonds, the
currency risk is always 100% hedged. The five year DFA fund gives the
"variable maturity" strategy more flexibility (more time to shift over),
which should enhance its risk/return characteristics. The two year DFA
fund has a lower E/R and has somewhat less volatility due to its shorter
duration. We have a slight preference for the five-year fund, but both
should be very good choices.
|
| Vanguard Short-Term Investment-Grade Fund (VFSTX).
E/R: 0.22%. This fund principally invests in investment grade corporate
bonds of short duration.
|
| iShares Barclays 1-3 Year Credit Bond Fund (CSJ).
E/R: 0.20%. This ETF tracks the Barclays US 1-3 year Credit Index. For
more information on ETFs, see here.
|
| iShares S&P/Citigroup 1-3 Year International Treasury Bond Fund (ISHG).
E/R: 0.35%. This ETF tracks the S&P/Citigroup International Treasury
Bond Index Ex-US 1-3 Year index. Basically, it invests in short-term treasury
bonds of developed countries outside the US. For
more information on ETFs, see here.
|
| SPDR Barclays Capital Short Term International Treasury Bond ETF (BWZ).
E/R: 0.35%. This ETF tracks the Barclays Capital 1-3 Year Global
Treasury ex-US Capped index. Basically, it invests in short-term treasury
bonds of developed countries outside the US. For
more information on ETFs, see here.
|
| iShares Barclays Intermediate Credit Bond Fund (CIU).
E/R: 0.20%. This ETF tracks the Barclays US 1-10 year Credit Index. For
more information on ETFs, see here.
|
| Vanguard Short-Term Bond Index Fund ETF (BSV). E/R: 0.11%. This ETF tracks the Barclays US 1-5 year Govt/Credit Index. This fund is a
different share class of the Vanguard Short-Term Bond Index Fund (VBISX). This fund suffers due
to its use of treasury bonds (which have lower expected risk-adjusted returns
than similar duration investment-grade corporate bonds). For more
information on ETFs, see here.
|
| TIAA-CREF Short-Term Bond Fund (TCSTX). E/R: 0.30%.
This fund suffers due to its use of treasury bonds (which have lower expected
risk-adjusted returns than similar duration investment-grade corporate bonds).
|
| Vanguard Short-Term Bond Index Fund (VBISX). E/R: 0.22%. This
fund tracks the Barclays US 1-5 year Govt/Credit Index. This fund suffers due
to its use of treasury bonds (which have lower expected risk-adjusted returns
than similar duration investment-grade corporate bonds).
|
| PIMCO Low Duration Fund Institutional Shares (PTLDX). E/R:
0.43%. We see no reason to consider this fund given the availability of
the above lower cost alternatives. |
This web page contains the current opinions of Eric E. Haas at the time it is
written — and such opinions are subject to change
without notice. This web page is for educational purposes only —
we believe the information provided here to be useful and accurate at the time
it is written.
Information contained herein has been obtained from sources believed to be
reliable, but is not guaranteed.
No investor should invest solely on the basis of information listed here.
Before investing, it is important to consult each prospective investment's
prospectus and consider both its risk/return characteristics and its effect on
your overall portfolio.
This information is not intended to be a
substitute for specific individualized tax, legal, or investment planning
advice. Where specific advice is necessary or appropriate, Altruist
recommends consultation with a qualified tax adviser, CPA, financial planner, or
investment adviser. If you would like to discuss the rationale or support
for any particular idea expressed on this web page, feel free to
contact us.
