Core Insights - Short-term bond funds have outperformed the core index, making them a favorable alternative during periods of persistent inflation, with an average return of 5.10% over the past year [1] - Over the last three years, short-term bond funds returned an annualized rate of 4.77%, compared to the Morningstar US Core Bond Index's return of 2.69% [2] Performance Comparison - The Morningstar US Core Bond Index has returned 2.54% over the last 12 months, 2.69% annually over the last three years, and has lost 0.73% annually over the last five years [2] - The selected short-term bond funds were chosen based on their performance over one-, three-, and five-year periods, all exhibiting active management [2] Active Management Importance - With the U.S. Federal Reserve's divided stance on interest rate policy, active management is crucial for bond exposure [3] - Vanguard offers two active short-term bond funds that are recommended for consideration [3] Fund Characteristics - The Vanguard Short Duration Bond ETF (VSDB) is designed for fixed income investors seeking to maximize yield while remaining in investment-grade debt, mitigating interest rate risk and price volatility [4] - VSDB has a low expense ratio of 0.15%, making it competitive with passive fund peers [5] Municipal Bond Option - The Vanguard Short Duration Tax-Exempt Bond ETF (VSDM) provides a blend of yield and credit quality for those interested in active short-term municipal bond exposure [6] - VSDM offers federal tax-free income and has an even lower expense ratio of 0.12% [7] Expertise Leverage - Both VSDB and VSDM leverage the expertise of the Vanguard Fixed Income Group, which has been managing active funds for nearly 50 years [8]