VCSH ETF

Yield may be the prime motivator for adding exposure to bonds. But fixed income investors should also look to mitigate default and rate risk.

Extracting yield in the current market environment is a prime option for getting bond exposure. However, the risk associated with depreciating prices shouldn't put off prospective fixed income investors.

The VCSH ETF is a safe choice for conservative investors looking for income and stability, as it primarily holds high-quality corporate bonds with short-term maturity. With a low expense ratio, diversified portfolio, and minimal credit risk, this fund is an appealing option in the bond market.

With the U.S. Federal Reserve recently standing pat on interest rate hikes, bets on rate cuts are dissipating as the data-dependent central bank seeks more confirmation before loosening monetary policy. In the meantime, it's helping to fuel spikes in short-term yields.

Vanguard Short-Term Corporate Bond ETF is a fixed-income ETF with $42.8 billion in AUM and a low volatility profile. The fund is overweight A and BBB corporate bonds and provides exposure to the short-term investment-grade U.S. corporate bond market. The predicted 12-month return for VCSH is 6%, with a potential drawdown of -1.6% from credit spreads widening.

Federal Reserve rate hikes have led to higher yields on bonds and fixed-income securities. VCSH offers slightly higher income with slightly higher risk than T-bills. An overview of the fund follows.

Vanguard Short-Term Corporate Bond Index Fund ETF Shares is a good option for investors looking to park their cash temporarily in a low-risk vehicle. The fund invests in a well-diversified basket of almost 2,500 corporate bonds with an average yield of 5.5% and average duration of 2.7 years. The fund's holdings are mostly rated AA, A, or BBB, with a low risk of default, and the majority of the bonds will mature within 1 to 4 years.

Fixed income investors are undoubtedly hoping that the current consensus regarding the Federal Reserve not raising interest rates for the remainder of this year proves true. The July reading of the Consumer Price Index (CPI) appears to imply the central bank might just have that latitude.

With the markets expecting interest rates to fall, the bond market may see more upside, including corporate bonds. Those haven't gotten much attention in various parts of the globe, according to research by Fisch Asset Management.