EDV Profile
The Vanguard Extended Duration Treasury Index Fund is an investment vehicle that seeks to replicate the performance of the Bloomberg U.S. Treasury STRIPS 20-30 Year Equal Par Bond Index. This index is composed of zero-coupon U.S. Treasury securities, commonly known as Treasury STRIPS, which are securities stripped of their coupons and sold at a discount. These securities are fully backed by the U.S. government and have maturities ranging from 20 to 30 years, providing long-term fixed income investment opportunities.
The fund utilizes an indexing investment strategy to achieve its objective, which involves investing primarily in U.S. Treasury STRIPS that match the characteristics of the index. By doing so, the fund aims to provide investors with exposure to long-duration U.S. government securities. At least 80% of the fund's assets are dedicated to U.S. Treasury securities that are part of the index, ensuring a close alignment with the performance of the underlying benchmark.
The Vanguard Extended Duration Treasury Index Fund is designed for investors seeking long-term investment in U.S. government securities with extended durations. The fund's focus on zero-coupon bonds means that it does not make periodic interest payments but rather compounds interest over time, paying out the face value at maturity. This structure can offer significant capital appreciation potential, especially in a low-interest-rate environment or when anticipating long-term economic stability.
Investors should be aware that the fund’s extended duration exposes it to higher interest rate risk compared to shorter-duration bonds. As interest rates rise, the value of long-duration bonds like Treasury STRIPS may decline more sharply than that of bonds with shorter durations. Consequently, the fund may exhibit greater volatility and price fluctuations, reflecting the inherent risks associated with long-term fixed income securities.
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