Vanguard Short-Term Tax-Exempt Bond ETF Shares (VTES)

ETF Vanguard Short-Term Tax-Exempt Bond ETF Shares (VGSH) Overview

Profile

Target Sector: US Short-Term Municipal Bonds Asset Allocation: Focuses on investment-grade municipal bonds with maturities of less than three years. Investment Strategy: Passively tracks the Bloomberg Barclays Municipal Bond 0-3 Year Index.

Objective

The primary goal is to provide current income exempt from federal and most state and local taxes. VGSH aims for high current income and capital preservation by investing in high-quality, short-term municipal bonds.

Issuer

Issuer: Vanguard Reputation and Reliability: Vanguard is a highly reputable and reliable investment company with over $8 trillion in assets under management. Management: The ETF is managed by experienced portfolio managers at Vanguard.

Market Share

Market Share: VGSH is the largest short-term municipal bond ETF, with a market share of approximately 25% as of November 2023.

Total Net Assets

Total Net Assets: Approximately $26 billion as of November 2023.

Moat

Competitive Advantages:

• Low expense ratio: VGSH has an expense ratio of 0.07%, making it one of the cheapest short-term municipal bond ETFs available.
• Diversification: The ETF invests in a wide range of municipal bonds, which helps mitigate risk.
• Tax efficiency: The fund's tax-exempt status makes it attractive for investors in high tax brackets.

Financial Performance

Historical Performance: VGSH has historically outperformed its benchmark index, with an average annual return of 2.5% over the past five years. Benchmark Comparison: The ETF has consistently outperformed the Bloomberg Barclays Municipal Bond 0-3 Year Index.

Growth Trajectory

Trends and Growth Patterns: The short-term municipal bond market is expected to continue growing in the coming years, driven by low interest rates and high demand for tax-exempt income.

Liquidity

Average Trading Volume: VGSH has an average daily trading volume of over 2 million shares, making it a highly liquid ETF. Bid-Ask Spread: The ETF typically has a bid-ask spread of less than 0.01%, indicating low trading costs.

Market Dynamics

Economic Indicators: Interest rates, inflation, and economic growth all impact the performance of municipal bonds. Sector Growth Prospects: The short-term municipal bond market is expected to benefit from continued low interest rates and high demand for tax-exempt income. Current Market Conditions: Recent market volatility has created opportunities for investors to find attractive yields in the municipal bond market.

Competitors

Key Competitors:

• iShares Short Treasury Bond ETF (SHV)
• SPDR Bloomberg Barclays Short Term Municipal Bond ETF (SHM)
• Vanguard Intermediate-Term Tax-Exempt Bond ETF (VGIT)

Expense Ratio

Expense Ratio: 0.07%

Investment Approach and Strategy

Strategy: Passively tracks the Bloomberg Barclays Municipal Bond 0-3 Year Index. Composition: Invests in investment-grade municipal bonds with maturities of less than three years.

Key Points

• Low expense ratio
• Diversified portfolio
• Tax-exempt income
• Consistent outperformance
• High liquidity

Risks

Volatility: Municipal bond prices can fluctuate, leading to potential losses for investors. Market Risk: The ETF is subject to interest rate risk, inflation risk, and credit risk.

Who Should Consider Investing

• Investors in high tax brackets
• Investors seeking current income
• Investors with a short-term investment horizon

Fundamental Rating Based on AI

Rating: 8.5 out of 10

Justification: VGSH has a strong fundamental profile based on its low expense ratio, diversified portfolio, tax-exempt status, consistent outperformance, and high liquidity. The AI analysis considers factors such as financial performance, market position, and future prospects.

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.

Resources

• Vanguard Website
• Morningstar Website

Disclaimer: The information contained in this analysis is based on data available as of November 2023. Market conditions and data may have changed since that time.