From Yahoo Finance: 2025-04-05 10:15:00

In the search for income, investors often overlook risk, which is crucial in both stocks and bonds. Vanguard offers a range of bond ETFs, from short to extended durations, each with varying levels of risk and reward. Bonds are essentially loans, with U.S. Treasury securities considered among the safest options due to minimal default risk. Duration, or the length of the loan, plays a key role in bond investing, affecting how much capital is tied up. Interest rate fluctuations impact bond values, making it essential for ETF investors to consider duration when choosing investments.

The Vanguard Short Term Treasury ETF and Vanguard Intermediate Term Treasury ETF offer different risk and reward profiles based on interest rate changes. Short-term options adjust faster to rate changes, providing higher interest payments. Overall, the Vanguard Short Term Treasury ETF currently offers the best risk/reward characteristics for most investors, balancing yield and price risk effectively. The chart displays the yield differences among various Vanguard bond ETFs, with shorter-duration options often proving more rewarding in terms of income.

Holders of longer-duration ETFs have seen better total returns over time, but also faced greater price risk. Bonds in a portfolio serve to reduce risk and balance the volatility of stocks, providing income and diversification. For most investors, sticking with a safer option like the Vanguard Short Term Treasury ETF is a wise choice, as it offers a good balance of yield and risk. Going beyond the Vanguard Intermediate Term Treasury may not justify the increased price risk associated with longer durations.



Read more at Yahoo Finance: Why Going Short Could Mean Less Risk and More Reward