The Vident Core U.S. Bond IndexTM, tracked by the VBND ETF, is designed to enhance the risk and return profile of traditional U.S. core bond indices. This innovative index optimizes the mix of credit quality, interest rates, and yield by diversifying risks across all core U.S. bond sectors, including U.S. Treasuries, U.S. agency securities, agency mortgage-backed securities, and investment-grade corporate bonds, as well as non-core sectors like high-yield corporate bonds and Treasury Inflation-Protected Securities (TIPS).
The Vanguard Total International Bond ETF (VBND) offers investors exposure to a diversified portfolio of international bonds, and while its primary objective is fixed income, it also provides dividend distributions. VBND's dividend eligibility is determined by the interest income generated by its underlying bond holdings. These distributions typically occur on a monthly or quarterly basis, and their amounts depend on the yields of the international bonds in the fund's portfolio. Vanguard's disciplined approach to managing the ETF's holdings ensures that investors can benefit from both international bond market exposure and periodic dividend income.
The Vident Core U.S. Bond IndexTM is the underlying benchmark that VBND, the ETF, tracks. This ETF employs a passive management or indexing investment approach, aiming to mirror the performance of the Vident Core U.S. Bond IndexTM. The Index offers a unique blend of credit quality, interest rate, and yield characteristics compared to traditional U.S. core bond indices. It achieves diversification across various U.S. bond sectors, including Treasuries, agency securities, agency mortgage-backed securities, investment-grade corporate bonds, high-yield corporate bonds, and Treasury Inflation-Protected Securities. Additionally, the Index utilizes a systematic, rules-based approach to manage sector weights based on valuations, historical relative valuations, default rates, and other quantitative factors, enhancing risk management within the strategy. VBND investors seek exposure to this comprehensive, diversified, and strategically managed U.S. bond index.
The correlation aspect of the Vident Core U.S. Bond IndexTM (VBND) is crucial for understanding its performance and risk characteristics in relation to the broader U.S. bond market. VBND seeks to improve the overall mix of credit quality, interest rate, and yield compared to traditional U.S. core bond indices. While VBND diversifies interest rate and credit risks across various bond sectors, its correlation with the broader bond market can vary based on the specific allocation strategy employed within the index. Investors interested in understanding VBND's correlation with other bond indices and its performance relative to the broader bond market can leverage ETF Insider's web app to study these correlations in depth. The tool offers valuable insights and visualization tools to help investors make informed decisions about their bond investments and assess the overlap with other bond ETFs and indices.
The Vanguard Total International Bond ETF (VBND) is primarily invested in international bond markets. This ETF provides exposure to a diversified mix of international fixed-income securities, including government bonds, corporate bonds, and other debt instruments issued by foreign entities. Investing in VBND allows investors to access global bond markets and diversify their fixed-income portfolios beyond domestic bonds.
The exposure characteristic of the Vanguard Total International Bond ETF(VBND) ETF primarily focuses on providing investors with exposure to flexible exchange options (FLEX Options) that reference the price performance of the SPDR® S&P 500® ETF Trust (the Underlying ETF). FLEX Options are customized equity or index option contracts traded on an exchange, offering investors the ability to customize key contract terms. The Underlying ETF replicates the S&P 500® Index, aiming to match its price and yield performance. VBND employs a target outcome strategy, offering a buffer against the first 10% of Underlying ETF losses and a cap on returns over an approximate one-year period. VBND allows investors to potentially benefit from the performance of the S&P 500® Index while providing downside protection through FLEX Options.
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