Many investors focus primarily on stocks. However, the global bond market is even bigger than the stock market.
With that in mind, it isn't surprising that 36 of the 97 exchange-traded funds (ETFs) offered by Vanguard are bond funds. So many options might make it difficult for investors to make a decision. If you want to simplify the process, here's one no-brainer Vanguard bond ETF to buy right now for less than $100.
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A lot to like about this ETF
The Vanguard Long-Term Bond ETF (BLV 0.12%), as its name indicates, invests in long-term bonds. The average effective maturity of the bonds in its portfolio is 22.1 years. This ETF attempts to track the performance of the Bloomberg U.S. Long Government/Credit Float Adjusted Index.
There's a lot to like about this Vanguard bond ETF. I'd put its yield near the top of the list. The Vanguard Long-Term Bond ETF's 30-day SEC yield currently stands at 5.31%. That's the fourth highest yield in the Vanguard family. Here's another plus: The ETF pays its distributions monthly.
This ETF owns 2,911 bonds, which provides ample diversification in the bond market. Roughly 52% of the bonds in its portfolio were issued by the U.S. government. All of the remaining bonds are investment-grade corporate bonds. Around 20.3% the ETF's bonds have a credit rating of "A," denoting high credit quality with low risk of default; while another 21.1% have a credit rating of "BBB," denoting good credit quality with expectations of a low risk of default. The other bonds owned by the Vanguard Long-Term Bond ETF have strong credit ratings of "AAA" and "AA."
As is the case with all Vanguard funds, the costs of investing in the Vanguard Long-Term Bond ETF are low. The ETF's annual expense ratio is only 0.03%, a tiny fraction of the average expense ratio of 0.85% for similar funds.
Potential catalyst on the way
I can think of one thing you probably won't like about this ETF: its recent performance. The Vanguard Long-Term Bond ETF is barely in positive territory this year and is nearly 40% below its peak set in late 2020. However, a potential catalyst could be on the way that sparks a rebound.
Bad economic news is often good news for bonds and bond ETFs. The July jobs report was unexpectedly dismal. The Bureau of Labor Statistics also made sharp downward revisions to employment numbers for the previous two months.
The apparent weakening in the U.S. economy increases the chances that the Federal Reserve will cut interest rates. When interest rates fall, bond prices typically rise. And if bond prices rise, so will the price of the Vanguard Long-Term Bond ETF.
Granted, the Fed could hold off on further rate cuts to see what the impact of the Trump administration's tariffs might be. In particular, concerns exist that tariffs could lead to higher inflation. The Federal Reserve is less likely to reduce interest rates if inflation resurges. However, tariffs can cause one-time price shocks but don't result in a sustained higher inflation rate.
Good timing
Traders on CME Group's FedWatch peg the probability that the Federal Reserve's Federal Open Market Committee cuts interest rates in its next meeting scheduled for Sept. 17, 2025, at 86.1%. I don't know if the likelihood is that high, but I do expect the Fed will cut rates in the not-too-distant future. If that happens, buying the Vanguard Long-Term Bond ETF could pay off nicely.
Over the long term, other Vanguard ETFs that own stocks will almost certainly outperform this bond ETF. The Vanguard Long-Term Bond ETF's average annual return since its inception in April 2007 is only 4.18%. However, the timing appears to be good to buy this ETF now.
