Morningstar's risk is based on past performance (over the last ten years). However, for a bond fund, you can identify the actual risks, such as interest-rate risk, credit risk, and call risk. The risk in performance of a bond fund depends on how much each of those risks affected bonds, and at what time (for example, if credit risk rises but interest rates fall, a fund holding long-term lower-quality bonds won't lose much).I have to challenge your statement that the outperformance is due to increased risk level.
Go to the Morningstar links I provided. Click the RISK tab.
You will find
VBTLX RISK SCORE = 19
VCOBX RISK SCORE = 19
MUN
But even more important, you don't care about the risk of an individual fund, but about the risk of your portfolio; will your bond fund gain or lose when the stock market crashes? In 2008, Treasury bonds gained and corporate bonds lost, so you got better risk reduction from a Treasury-heavy fund such as Total Bond Market. (Vanguard Core Bond Fund did not exist at that time, but you can see how other bond funds did.)
Statistics: Posted by grabiner — Thu Feb 20, 2025 11:25 pm