Vanguard Inflation Protected Securities Fund (VIPSX)

To protect against inflation, investor can buy TIPS (Treasury Inflation Protected Securities). Choosing the individual TIPS bond may be tedious. Easiest way is to choose the inflation protected bond fund through mutual fund or exchange traded fund (ETF). One of the big and popular TIPS bond funds is Vanguard Inflation-Protected Securities fund.

Vanguard Inflation-Protected Securities Investor (VIPSX)

The Vanguard Inflation Protected Securities fund objective is to provide inflation protection and income consistent with investment in inflation-indexed securities. This Vanguard fund invests majority of assets (>80%) in inflation-indexed bonds issued by the U.S. government, its agencies and instrumentalities, and corporations. It may invest in bonds of any maturity, typically its dollar-weighted average maturity is in the range of 7 to 20 years. This fund will invest in investment grade bonds.

Fund Details

• Fund Inception Date: June 29, 2000
• Ticker Symbol: VIPSX
• CUSIP: 922031869
• Beta (3yr): 1.16
• Rank in category (YTD): 45%
• Category: Inflation-Protected Bond
• Yield: 3.61%
• Capital Gains: 0%
• Expense Ratio: 0.20%  
• Net Assets: $ 41.80 billion
• Number of Years Up: 10 years
• Number of Years Down: 1 year
• Annual Turnover Rate: 28%

updated on 5/23/2012

Vanguard Inflation Protected Secs

Since its inception in June 2000, this fund has been managed by John Hollyer. The annual expense ratio of this fund is 0.22%. This figure is lower compared to the average in the Inflation-Protected Bond category (0.84%). The dividend yield of this fund is 3.35%. The last dividend distributed in September 2011 ($0.09).

Best Inflation Protected Bond Mutual Funds 2012

To start investing in this taxable bond fund, investor will need a minimum of $3,000 for either brokerage or IRA account. This fund is a no load fund, therefore it has neither management fee nor front-end sales load fee. The current total net assets of this fund are $36.91 billion. Easiest way to invest or buy this mutual fund is by opening the VBS (Vanguard Brokerage Services).

Since its inception 10 years ago, this fund has recorded 9 years of positive return. The only year when this VIPSX fund returned in negative was in 2008 (-2.85%). Morningstar gave this fund 3-stars rating and gold rating. Based on the load adjusted return, the fund's performance is as follow:

• 1-year: 10.29%
• 3-year: 6.24%
• 5-year: 6.82%
• 10-year: 6.99%

The average maturity of this mutual fund is 9.5 years and the average duration is 8.5 years. As of September 2011, this fund has a total of 36 bonds. The average coupon is 1.7% and the estimated yield to maturity is 1.8%. The top issuer of this Vanguard fund is Treasury/ Agency (99.4%). The remaining 0.6% is other.

The principal investment risks in investing in this fixed income fund include income risk, interest rate risk, and manager risk.

Pros:

• Low expense ratio fee
• No sales load fund

Cons:

• none

Disclosure: No Position

Other interesting bond fund:

• JPMorgan Core Bond A (PGBOX)
• American Funds Bond Fund of America A (ABNDX)