Vanguard Short-Term Investment Grade Fund (VFSTX)

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Vanguard Short-Term Investment Grade fund (VFSTX) is a popular bond mutual fund. This investment fund provide ample of yield.

This type of fund is useful in interest rate hikes situation. When the federal interest rate is increasing, you will need to have a short duration bond to protect your fund value. Since it is short term bond fund, the yield is smaller than other intermediate term or long term bond fund.

The funds in Kiplinger 25 best fund list are updated regularly. This Vanguard Short-Term Investment Grade is also part of 2010 fund list. As any Vanguard fund, it has low expense ratio and is part of no load mutual fund.

Vanguard Short Term Investment Grade (Ticker: VFSTX)

The Vanguard Short-Term Investment Grade fund investment objective is to provide current income to its investor while maintaining limited price volatility. This Vanguard fund will invest its assets in high and medium quality investment grade bonds with short term maturities (>80% of assets). It usually keeps an average weighted maturity of between 1 and 4 years. The fund may invest in U.S. government bonds, corporate bond or commercial paper, pooled consumer loans or bank obligations, and dollar-denominated foreign securities.

VFSTX Fund Facts

    Vanguard Short-Term Investment Grade Fund (VFSTX)
  • Fund Inception Date: October 1982
  • Ticker Symbol: VFSTX (Investor Shares)
  • CUSIP: 922031406
  • Beta (3yr): 0.53
  • Rank in category: 43
  • Category: Short Term bond
  • Yield: 1.94%
  • Distribution: Monthly
  • Capital Gains: If necessary, there will be capital gains on December and March
  • Fiscal Year End: January
  • Number of Years Up: 26 years
  • Number of Years Down: 3 years
  • Fund Manager: Gregory S. Nassour
  • Net Assets: $59.6 Billion
  • Expense Fee: 0.20%
  • Min to Invest: $3,000
  • Capital Gains: N/A
  • Turnover rate: 68%
updated May 2017

Compare to average category annual expense ratio of 0.90%, this Vanguard fund has a low expense ratio. This fund only has an annual expense ratio of 0.22% which is >4 times lower than average. Since 2008, Gregory S. Nassour has been the lead manager of this fund. Mr Nassour has worked in investment management since 1992.

The easiest way to invest in any Vanguard funds is by opening a Vanguard account. Investor will need to provide $3,000 initial investment fund to meet the minimum initial investment requirement for regular brokerage account and IRA account (Individual Retirement Account). If you can’t open the Vanguard account, this VFSTX fund can be bought from 82 brokerages like Pershing FundCenter, E*Trade Financial, T Rowe Price, JPMorgan, Wells Fargo Advisors MF Advisory, etc. For any retirement account (401k or IRA), you can check with your account administrator for details. Top Performer Short Term Bond Mutual Funds July 2011

In term of performance, this Vanguard fund has returned 3.79% over the past year and 4.35% over the past 3 years. The fund best 1 year total return occurred in 2009 with 14.03% return and the fund worst 1 year total return occurred in 2008 with -4.74% return. The fund also has a 4 stars rating from Morningstar. The fund annual turnover rate is 48%. The fund total net assets are $38.3 billion. This top rated bond fund also has a yield of 3.22% per year. This yield is distributed monthly.
  • Year 2017: 1.17% (YTD)
  • Year 2016: 2.72%
  • Year 2015: 1.03%
  • Year 2014: 1.76%
  • Year 2013: 0.97%
As of March 2011, this Vanguard Short-Term Investment Grade fund has 1218 number of bonds. The yield to maturity is 1.7%. The average maturity is 2.9 years and the average duration is 2 years. The top 8 fund issuers are finance (31.6%), industrial (28.3%), asset-backed (17.3%), short term reserves (6.0%), utilities (5.8%), treasury / agency (4.7%), commercial mortgage backed (3.2%), foreign (1.3%). As January 2011, the fund asset allocations are as follows: domestic bonds (69.36%), foreign bond (18.86%), cash (11.46%), preferred (0.25%), and other (0.06%). More details about the top holdings in the figure.

If you are interest in lower cost Vanguard Admiral Shares fund, you can buy this admiral shares as well. The Vanguard Short-Term Investment Grade Admiral Shares ticker is VFSUX. This VFSUX fund's expense ratio is 0.11% per year. You will need $50,000 initial investment to buy this mutual fund.

Note: There is no 12b1 fee, front end sales load fee, and deferred sales load fee for either classes (investor shares and admiral shares).

Disclosure: No Position

Other Short Term Bond Mutual Funds:
updated on 5/20/2012

As of May 2012, the portfolio turnover rate is 47%. The average effective duration is 2.38 years. its average credit quality is A. This short term bond fund has total net assets of $39 billion. As of April 2012, the top 5 sectors are corporate bond (60%), asset backed (13.37%), U.S. treasury (6.79%), non-U.S. government (3.34%), and other government related (1.96%).

This is my third article about the Kip 25 fund; you can check my previous articles about Dodge & Cox Income and DoubleLine Total Return Bond fund.