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Understanding Etfs And Vanguard Bond Index Funds

Investments are essential to consistently creating wealth throughout one’s lifetime. Even for people not planning to retire soon, setting aside some money regularly will help in the long run. Once they reach retirement age, this amount will help such individuals and their families if a financial emergency arises. Several alternatives, like ETFs, mutual funds, and Vanguard bond index funds, offer avenues for systematic investment due to their potential for long-term growth, diversification benefits, and professional management.

Understanding Etfs And Vanguard Bond Index Funds

What do you mean by ETFs?

  • ETF stands for Exchange Traded Funds. They are market securities that are very similar to index funds as they track the market index, commodity, bonds and other such assists.
  • Today, there are around 19,000 ETFs in the nation in total, and they are becoming the new favorite of investors.
  • Today, many people are investing in ETFs rather than in mutual funds as it has a higher liquidity rate and lower fees compared to mutual funds.
  • ETFs trade like stocks and they see a lot of market volatility.

Which are the top ETFs to consider investing in 2018?
Today many people are considering investing in ETFs over mutual funds. If you are one of them, then here are three of the top ETFs that you can purchase in 2018:

  • Vanguard Health Care ETF – Vanguard is the second largest US ETF sponsor if you go by the assets of the company. Investing in this ETF is a smart decision as the medical industry is booming, and so are the returns of health-related bonds.
  • Tortoise Water Fund – Launched in 2018, this fund invests in government water suppliers that are making a fortune by supplying water in the drought-ridden areas of the country. The two principal holdings that come under this ETF are Pentair (PNR) and Water Utility Aqua America.
  • Loncar Cancer Immunotherapy ETF (CNCR) – With only 30 stocks with cancer researchers and pharmaceutical companies, this is a lesser known ETF that invests in the niche healthcare industry.

Which are some of the best Vanguard funds for retirees?
Vanguard has a variety of dividend funds, conservative allocation funds, and bond index funds that are great choices for retirees. Here are two of the best Vanguard funds that retirees must invest in:

  • Vanguard Target Retirement 2050 Fund (VFIFX) – As the name suggests, this mutual fund is a target date fund which will allow you to liquidate your investment in 2050. So, this fund is great for investors who are planning to retire somewhere between 2048 and 2052.
  • Vanguard Managed Payout Fund (VPGDX) – This fund is a great choice for current retirees who are looking for parallel income sources rather than young investors who are planning their retirement. Though the fund gives you great monthly payouts, note that you are required to make a minimum investment of $25,000.

Which Vanguard bond index funds should you invest in?
Vanguard has several top index funds, which are mutual funds that are passive and less risky as compared to active mutual funds that are a victim of the volatility of the market. Here are two of the best Vanguard bond index funds that retirees can buy:

  • Vanguard Total Bond Market Index (VBMFX) – This bond index fund has a 0.20 percent expense rate, which is one of the lowest expense rates amongst the top index funds. A long-term investment in this index bond might get you better returns that are much higher than that of regular bond funds.
  • Vanguard Short-Term Investment Grade (VFSTX) – This short-term Vanguard bond is a great choice for retirees if the interest rate in the market is rising as they are not interest rate sensitive. The shortcoming of this index bond fund is its low yield and return, as compared to the other index funds in the market.

Choose a mutual fund or ETF that offers exactly what you need. Keep in mind that though the yield that you will get is vital, there are other crucial determining factors like the minimum initial investment, expense ratio, and the volatility of the mutual fund that you need to consider before investing in any mutual funds or ETFs.

Tag: best vanguard funds for retirement portfolio (Keyword used as Vanguard funds for retirees and tweaked versions)

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