Short-Term Taxable Bonds
Short-Term Taxable are bonds of short duration.
There are several very similar investment options available. Which is best?
The funds are listed in rough order of our overall 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
- Vanguard Short-Term Corporate Bond Index Fund Admiral Shares (VSCSX). E/R: 0.06%. This fund tracks the Bloomberg US 1-5 year Corporate Bond Index.
- Vanguard Short-Term Corporate Bond ETF (VCSH). E/R: 0.03%. This ETF tracks the Bloomberg US 1-5 year Corporate Bond Index.
- Schwab 1-5 Year Corporate Bond ETF (SCHJ). E/R: 0.03%. This ETF tracks the Bloomberg U.S. 1-5 Year Corporate Bond Index.
- Vanguard Short-Term Investment-Grade Fund Admiral Shares (VFSUX). E/R: 0.09%. This fund principally invests in investment grade corporate bonds of short duration.
- Vanguard Short Duration Bond ETF (VSDB). E/R: 0.15%. This fund principally invests in investment grade US bonds of short duration.
- DFA Short-Duration Fixed Income ETF (DFSD). E/R: 0.16%. This fund's "variable maturity" and "variable credit" strategies should somewhat increase risk-adjusted returns.
- DFA Five-Year Global Fixed Income Portfolio (DFGBX). E/R: 0.20%. 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.
- Avantis Short-Term Fixed Income ETF (AVSF). E/R: 0.15%. This ETF buys short-term bonds.
- DFA Short-Term Extended Quality Portfolio (DFEQX). E/R: 0.18%. This fund's "variable maturity" and "variable credit" strategies should somewhat increase risk-adjusted returns. While it contains some foreign bonds, the currency risk is always 100% hedged.
- DFA Two-Year Global Fixed Income Portfolio (DFGFX). E/R: 0.16%. 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.
- Vanguard Short-Term Investment-Grade Fund (VFSTX). E/R: 0.20%. This fund principally invests in investment grade corporate bonds of short duration.
- SPDR Portfolio Short Term Corporate Bond ETF (SPSB). E/R: 0.04%. This ETF tracks the Bloomberg U.S. 1-3 Year Corporate Bond Index.
- iShares 0-5 Year Investment Grade Corporate Bond Fund (SLQD). E/R: 0.06%. This ETF tracks the Markit iBoxx USD Liquid Investment Grade 0-5 Index.
- iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB). E/R: 0.04%. This ETF tracks the ICE BofA 1-5 Year US Corporate Index.
- Fidelity Short-Term Bond Index Fund (FNSOX). E/R: 0.03%. This fund tracks the Bloomberg U.S. 1-5 Year Government/Credit Bond 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).
- Vanguard Short-Term Bond Index Fund Admiral Shares (VBIRX). E/R: 0.07%. This fund tracks the Bloomberg 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).
- Vanguard Short-Term Bond Index Fund ETF (BSV). E/R: 0.03%. This ETF tracks the Bloomberg US 1-5 year Govt/Credit Index. This fund is a different share class of the Vanguard Short-Term Bond Index Fund (VBIRX). This fund suffers due to its use of treasury bonds (which have lower expected risk-adjusted returns than similar duration investment-grade corporate bonds).
- iShares 1-3 Year International Treasury Bond ETF (ISHG). E/R: 0.35%. This ETF tracks the FTSE World Government Bond Index-Dev Markets 1-3 Years Capped Select Index. Basically, it invests in short-term treasury bonds of developed countries outside the US.
- SPDR Barclays Capital Short Term International Treasury Bond ETF (BWZ). E/R: 0.35%. This ETF tracks the Bloomberg 1-3 Year Global Treasury ex-US Capped index. Basically, it invests in short-term treasury bonds of developed countries outside the US.
- iShares 5-10 Year Investment Grade Corporate Bond ETF (IGIB). E/R: 0.04%. This ETF tracks the ICE BofA 5-10 Year US Corporate Index.
- TIAA-CREF Short-Term Bond Fund Advisor Shares (TCTHX). E/R: 0.36%. 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: 0.48%. 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 intended to serve two purposes:
- To educate the public; and
- To provide disclosure of Mr. Haas' opinions to prospective clients. We believe that prospective clients are well-served by being made aware of what they are buying—and what they are buying is advice that is based on these opinions.
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, PruFid 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.