The underperformance of active management versus passive indexing has been well documented, especially in equities. According to the latest S&P Dow Jones Indices SPIVA report, 89.3% of U.S. large-cap active funds underperformed the S&P 500 over the 15-year period ending Dec. 31, 2025.
However, that pattern is less pronounced in fixed income. Over the same period, 71.6% of investment-grade short- and intermediate-term bond funds underperformed their benchmarks, and that figure drops to 46.7% over 10 years and 27.9% over five years.
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The difference comes down to how these markets function. are highly liquid and widely covered, with prices quickly reflecting available information. That makes it difficult for active managers to consistently find mispriced opportunities.
Fixed-income markets, by contrast, are more fragmented. Many bonds trade over the counter, there is no centralized exchange or national best bid and offer, and pricing can vary across participants. This creates pockets of inefficiency that skilled managers may be able to exploit.
Research supports this view. For example, PIMCO found in a 2025 analysis that active bond funds outperformed passive peers in 64% of 10-year rolling periods over the past two decades. Factors such as security selection, yield curve positioning and credit analysis can add value in ways that are harder to replicate in equity markets.
Still, active management comes with higher fees, which remain a key hurdle to consistent outperformance. However, some asset managers aim to address that trade-off. Vanguard, known for low-cost indexing, has expanded its active fixed-income lineup while maintaining relatively low fees.
“Over the past few years, Vanguard has strategically deepened its focus on aligning with client preferences, particularly recognizing the significant advantages of the ETF structure,” says Perryne Desai, head of index fixed-income product at Vanguard. “This expansion has been driven by the introduction of active fixed-income ETFs, which are underpinned by our world-class investment team and rigorous investment process.”
Backed by teams of portfolio managers and analysts, these funds seek to outperform benchmarks without the typical cost burden. This is partly enabled by Vanguard’s unique cooperative structure, where mutual fund shareholders are also owners of the company.
Here are seven of the best Vanguard bond mutual funds and exchange-traded funds, or ETFs, to buy today:
| ETF | Expense Ratio |
| Vanguard Total Bond Market Index Fund Admiral Shares (ticker: ) | 0.04% |
| Vanguard Total International Bond Index Fund Admiral Shares () | 0.10% |
| Vanguard Short-Term Treasury Index Fund Admiral Shares () | 0.06% |
| Vanguard Tax-Exempt Bond Index Fund Admiral Shares () | 0.07% |
| Vanguard Core-Plus Bond ETF () | 0.20% |
| Vanguard Multi-Sector Income Bond ETF () | 0.30% |
| Vanguard High-Yield Active ETF () | 0.22% |
Vanguard Total Bond Market Index Fund Admiral Shares ()
“Vanguard’s bond fund lineup covers a wide range of bond types, including government bonds, corporate bonds, municipal bonds and international bonds,” says Wes Moss, managing partner and chief investment strategist at Capital Investment Advisors. “This breadth of options allows investors to create a well-diversified bond portfolio tailored to their specific investment goals and risk tolerance.”
Investors looking for a one-size-fits-all, hands-off option may prefer VBTLX. For a low 0.04% expense ratio, this bond fund holds 11,390 investment-grade domestic bonds. VBTLX’s portfolio currently spans corporate bonds, mortgage-backed securities and U.S. government Treasurys averaging to an intermediate maturity. Investors currently receive a 4.3% 30-day SEC yield with monthly distributions.
Vanguard Total International Bond Index Fund Admiral Shares ()
“VTABX offers diversification benefits by including investment-grade bonds issued by governments and corporations outside the United States and thus provides exposure to international bonds denominated in various currencies,” says Michael Ashley Schulman, partner at Cerity Partners. This fund charges a 0.1% expense ratio and currently pays a 3.5% 30-day SEC yield.
This Vanguard bond fund spans more than 6,700 government- and corporate-issued bonds from international developed and countries. It also employs currency hedging to mitigate the volatility from fluctuations in exchange rates. However, VTABX’s holdings are still all rated investment grade, which helps reduce principal loss. Vanguard rates VTABX a 2 out of 5 on their risk scale.
Vanguard Short-Term Treasury Index Fund Admiral Shares ()
“Investors need to understand the two main types of risk inherent in fixed-income investing before selecting a bond fund,” says Chris Tidmore, advisory research director at Vanguard’s Investment Advisory Research Center. “Bond funds with long-term maturities are more sensitive to changes in interest rates, while a lower credit quality in the underlying bonds also impacts the riskiness of a particular fund.”
Bond investors who want to reduce both types of risk may prefer VSBSX. This fund tracks the Bloomberg U.S. Treasury 1-3 Year Bond Index. With an average duration of just 1.9 years, it is less sensitive to changes in interest rates, so rising rates have a limited impact. Because all holdings are backed by the government, credit risk is minimal, though the trade-off is a modest 3.8% 30-day SEC yield.
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Vanguard Tax-Exempt Bond Index Fund Admiral Shares ()
“Another question to ask when considering bond funds for your portfolio is whether you’re investing outside of an individual retirement account or other tax-advantaged retirement account,” Tidmore says. “If you’re in a high tax bracket and investing outside of your retirement account, a tax-exempt bond fund could help reduce tax exposure.” The right tool for this role could be a like VTEAX.
This fund tracks the S&P National AMT-Free Municipal Bond Index. Its 3.5% 30-day SEC yield may appear modest at first glance, but the income is exempt from federal income tax and the alternative minimum tax. For investors in higher tax brackets, that tax-equivalent yield can be meaningfully higher than comparable taxable bond funds. VTEAX also remains low cost, charging a 0.07% expense ratio.
Vanguard Core-Plus Bond ETF ()
“With equities near highs, portfolios can gradually become more tilted toward stocks,” says Rebecca Venter, senior fixed-income product manager at Vanguard. “VPLS offers a way to rebalance, combining income with diversification that may help in volatile environments.” This Vanguard active bond ETF is designed to potentially outperform passive index-based counterparts like VBTLX.
VPLS uses a “core and satellite” approach to portfolio construction. The bulk of the ETF is held in investment-grade U.S. corporate bonds, Treasurys and mortgage-backed securities. However, VPLS is also able to selectively allocate to non-investment-grade bonds for higher yield. After deducting a reasonable 0.2% expense ratio, VPLS currently pays a 4.7% 30-day SEC yield.
Vanguard Multi-Sector Income Bond ETF ()
“For investors seeking income, credit exposure still does the heavy lifting,” Venter says. “VGMS takes a diversified, active approach across corporates, emerging markets and structured products to source it.” This Vanguard active bond ETF is pricier than VPLS with a 0.3% expense ratio, but makes up for it via a higher 5.5% 30-day SEC yield. However, VGMS’ portfolio has higher credit risk to watch out for.
Currently, a meaningful portion of the portfolio sits below investment grade. About 31.5% of holdings are rated BB, the highest tier of high-yield bonds, while another 18.5% are rated B, which carries significantly more default risk. This means the elevated yield is not without trade-offs, and investors should be comfortable with the added volatility that comes with non-investment-grade bond exposure.
Vanguard High-Yield Active ETF ()
“In high yield, where credits can behave very differently, selectivity matters,” Venter says. “VGHY brings that active discipline through Vanguard’s in-house team in a low-cost ETF wrapper.” This bond ETF is among the highest income-bearing funds in Vanguard’s lineup, with a current 30-day SEC yield of 6.3%. However, it remains fairly affordable for active management with a 0.22% expense ratio.
Unlike VGMS, which still includes some investment-grade exposure, VGHY’s portfolio is almost entirely focused on below-investment-grade bonds. Just under half of the portfolio is in BB-rated debt, with another roughly one-third in B-rated bonds. The fund also holds about 9.3% in securities rated CCC or lower, which carries a much greater risk of default but offers higher income in return.
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Update 05/06/26: This story was published at an earlier date and has been updated with new information.
