It often feels as if investors are facing massive uncertainty and volatility on all fronts. Whether it’s worries about high valuations of tech stocks, a possible artificial intelligence (AI) bubble, or ongoing energy price shocks and disruptions from the Iran War, many investors are looking for a safe place to land.
The past 16 years have been excellent for tech stock investors. But if U.S. growth stocks underperform in the future, bonds might be a better place to put some of your money today.
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One of the best ways to buy bonds is the Vanguard Total Bond Market ETF (NASDAQ: BND). This bond ETF lets you own thousands of investment-grade U.S. bonds for a rock-bottom expense ratio of 0.03%. BND has delivered average annual returns (by net asset value) of only 0.3% for the past five years, but came roaring back in the past year with a 4.2% return.
Recent research from Vanguard suggests that the future could be brighter for bond investors. Let’s see why BND might be a good choice for your portfolio.
The recent Vanguard 2026 economic and market outlook report was bullish on bonds. The report said that high-quality U.S. fixed income (bonds) has the best risk-return profile of any type of public investment for the next five to 10 years. Vanguard’s research expects U.S. bonds to deliver returns of 3.8%-4.8% during the next 10 years.
This means that according to Vanguard, bonds like BND will be a good investment for the next decade if interest rates stay higher for longer, while still staying above the rate of inflation. The report also said that if AI fails to deliver the hoped-for gains in productivity throughout the economy, bonds would be a good way to diversify against downside risks of stocks.
Buying bonds is a strategy to protect some of your money from the risks of stocks. It’s not a good way to grow your money for the long term. Most people should have some percentage of their portfolio in bonds while saving for retirement, based on their age, goals, and risk tolerance. Bonds can be a good choice for retirees who need to earn steady income from their investments — but even retired people shouldn’t put 100% of their money into bonds.
Diversifying into bonds is also a good move if you want to lock in some of the profits you’ve made from stocks in recent years, rebalance your portfolio, or adjust your asset allocations based on changes in your life or your future goals. Buying BND is one of the easiest, lowest-cost ways to invest in high-quality bonds.
