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I do understand from some of my friends who are concerned about fees and also if the ETF fund they are investing have some form of guarantee.

I managed to scan this Bond ETF which look to fit some of my friend criteria of type of ETF they are looking to invest.

Vanguard Short-Term Inflation-Protected Securities ETF (VTIP)

The $Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares(VTIP)$ follows the Bloomberg U. S. Treasury TIPS 0-5 year index.

Bloomberg U. S. Treasury TIPS 0-5 year index tracks Treasury Inflation Protected Securities (TIPS) with less than five years to maturity.

So this is suitable for people who are looking to invest in Short-Term bonds.

This is also suitable for people who has low risk appetite. The risk / reward scale is only 1 (low).

Low Fee Bond Fund

VTIP is a U.S. inflation bond fund with low fee (expense ratio only 0.04%, similar fund average ratio is around 0.59%).

This fund is designed to provide investors with cash flow, price appreciation and also capital preservation.

All these have a common objective to minimize the impact of inflation.

Performance

a. Interest Rate and Dividends

Despite the low expense ratio, the dividend yield is quite significant.

VTIP Dividend Yield is 5.66% for March 31, 2023.

The interest rate on individual TIPS owned by the fund is set when the bonds are issued. Dividends are paid quarterly on the inflation-adjusted value of the bonds.

b. VTIP Cumulative Total Returns Versus Peers

VTIP has performed well compared to its peers, similar ETF fund. Data shown is as of 31 Mar 2023.

Protected and Guarantee

Something worth noting is the shorter term bonds in this fund are protected from default by the federal government.

While the principal value of the bonds adjusts semi-annually based on the Consumer Price Index (CPI).

As inflation increases, or decreases, so will the principal value of the bonds within the fund.

Here is something we might want to take note :

Relationship of Inflation and Changing Interest to Bond’s prices

Inflation and changes in interest rates will have impact on a bond’s price.

Either a rise in interest rates or inflation rate will make bond prices drop most of the time.

Inflation and interest rates move in the opposite direction from bond prices.

VTIP Prices and Why I would invest

Looking at the current price chart, it look like the price is on the high side, but the objective is high dividend yield, so I would not be so concerned about the price.

I would look more at the positive factor:

• low expense ratio (low fees)

• high dividend yield (more than 5% as of 31 March 2023)

• risk/reward scale is low

• shorter term bonds in this fund is protected by the Fed government

Do share your thoughts in the comment section on what do you think of this ETF? Are you also looking into low risk inflation protected ETF?

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Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Technical Analysis, and there