Stabilize Your Portfolio With These 5 Bond Funds

By Qiana Chavaia on 5 February 2016 0 comments

Bonds are low-risk investments that can be used to stabilize your portfolio. You may already be familiar with them. Local cities, states, and the federal government are the biggest issuers of bonds, but corporations will also create bond certificates when they're seeking capital. And although they generally carry lower risk than stocks, as an investor you will still need to decide where your comfort level lies. Do you feel secure with corporate bonds, or do you prefer the assuredness that municipal and treasury bonds have to offer?

Fortunately, there are a variety of bond funds that allow you to tailor your investment to your risk tolerance and overall needs. Here are six well-performing bond funds to help stabilize your portfolio. (See also: The Most Important Thing You're Probably Not Doing With Your Portfolio)

1. iShares TIPS Bond ETF [STIP]

STIP offers exposure to short-term 0-5 years U.S. TIPS, which are government bonds whose value typically rises with inflation. The fund has some growth potential and low volatility. Use it as a short-term hedge against inflation.

  • Risk: Low
  • Goal: Track index of inflation protected U.S Treasury bonds of less than five years
  • Expense Ratio: .10%
  • Money Manager: BlackRock

2. iShares National Muni Bond ETF [MUB]

Municipalities nationwide fund capital projects with bonds; MUB iShares provides exposure to more than 2,000 U.S. municipal bonds with its top holdings in California and New York, representing 42.97% of its assets. The fund offers tax efficiency for investors in higher tax brackets.

  • Risk: Moderate
  • Goal: Track index of investment grade U.S. municipal bonds
  • Expense Ratio: .25%
  • Money Manager: BlackRock

3. Vanguard California Long-Term Tax-Exempt Fund Investor Shares [VCITX]

This fund aims to create federal and state tax-exempt income and appeals to investors in high tax brackets, particularly those residing within the state of California. This is an intermediate-term bond and more susceptible to inflation.

  • Risk: Moderate
  • Goal: Long-term tax-free income
  • Expense Ratio: .20%
  • Money Manager: Vanguard

4. Vanguard Total Bond Market ETF [BND]

The BND invests in more than 3,000 broad U.S. investment-grade bonds. The fund has relatively high potential for investment income with some volatility. It is appropriate for mid to long-term investors seeking a reliable income stream. Use it to diversify and balance the risks of stocks.

  • Risk: Low to moderate
  • Goal: Track U.S. bond market returns
  • Expense Ratio: .09%
  • Money Manager: Vanguard

5. Vanguard Total International Bond ETF [BNDX]

With its eyes on the world's bond markets, BNDX employs hedging strategies to protect against uncertainty in exchange rates. The fund offers broad exposure to non-US dollar denominated investment grade bonds. Use it to hedge against inflation.

  • Risk: Low to moderate
  • Goal: Track Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index
  • Expense Ratio: .20%
  • Money Manager: Vanguard

Do you have any bond funds in your portfolio?

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