Vanguard Intermediate-Term Corporate Bond ETF (VCIT)

What is VCIT?

VCIT holds a broad portfolio of US dollar-denominated, investment-grade corporate bonds with intermediate maturities, generally in the five-to-ten-year range. It aims to track a corporate bond index rather than a stock index, so its return profile is centered on interest income and bond price changes rather than equity-style growth.

How bond funds behave differently from stock funds

Bond prices generally move inversely to interest rates: when rates rise, existing bond prices tend to fall, and vice versa. Because VCIT holds intermediate-term bonds, it carries more interest-rate sensitivity than a short-term bond fund but less than a long-term bond fund. As investment-grade debt, its issuers are rated as having relatively lower credit risk than high-yield ("junk") bonds, though credit risk is never zero.

Risks and considerations

VCIT's price can decline when interest rates rise, and its income and value depend on the ability of underlying corporate issuers to make interest and principal payments. It is generally less volatile than a diversified stock fund but is not risk-free, and it can still lose value over a given period.

Long-term investing considerations

Bond funds like VCIT are often used to add income and reduce overall portfolio volatility alongside stock holdings, though they typically offer lower long-term expected growth than equities. Consider testing a mixed-asset scenario with a calculator rather than assuming bonds and stocks will always move independently of one another.