On this episode of the ETF of the Week podcast, VettaFi’s Head of Research Todd Rosenbluth discussed the Vanguard 0 to 3 month Treasury Bill ETF (VBIL) with Chuck Jaffe of Money Life. The pair covered a range of topics related to the fund, providing investors with a deeper understanding of the ETF. Additionally, they shared details about the upcoming ETF conference, Exchange, which will take place from March 23 to 26.
Chuck Jaffe: Welcome to the ETF of the week, where we get the latest take from Todd Rosenbluth, the head of research at VettaFi. Go to VettaFi.com to find all the tools you need to be a savvier, smarter ETF investor. And to get more details on the new newsworthy, trending, and timely exchange traded funds that we talk about here.
And speaking of timely, well, VettaFi is the organizer of Exchange. It’s the largest ETF conference geared towards financial advisors. And it’s being held March 23rd through March 26th in Las Vegas. You can still get in on it. So stay tuned after Todd and I finish up here for a small message with more information about Exchange. Todd Rosenbluth. Great to chat with you again.
Todd Rosenbluth: It’s great to be back, Chuck.
Chuck Jaffe: Your ETF of the week is…
Todd Rosenbluth: The Vanguard 0 to 3 month Treasury Bill ETF (VBIL).
Chuck Jaffe: VBIL, the Vanguard 0 to 3 month Treasury Bill ETF. Now, Todd, 0 to 3 month Treasury bills about as unexciting, about as boring as it gets. But right about now the market is anything but boring. So is this the what do you do when the market gets crazy? You hunker down? Is this the hunker-down ETF for the week?
Todd Rosenbluth: This is this is an example of just stay calm, be patient and ride this out until hopefully things get better for the stock market. And so you and I are recording this when it’s back-to-back days of significant selloffs in the equity markets, there’s been a flight to quality, a flight to safety. That’s exactly what this ETF VBIL offers.
And it’s new. Vanguard doesn’t launch a lot of ETFs, so we at Vetta-Fi take notice when they do. This ETF launched at the end of January, so it’s new. It doesn’t have a long track record, but it owns ultra short treasury bills. So I think we can better understand what this holds. And it’s just seven basis points.
So, at the time that we’re recording this, this is the cheapest way to get short-term treasury bill exposure through the ETF structure.
Chuck Jaffe: This is a parking space, basically, until people feel better? Or is this an investment choice to you?
Todd Rosenbluth: It’s yielding 4% right now. So that’s.. that’s okay. It’s not clear if the Feds are going to be cutting interest rates, and how much they’re going to be. There’s still a lot of debate. So you can reduce your interest rate sensitivity. You can use this as a safe haven and for short term purposes. For folks that don’t want to just have cash on the sidelines, they move their money into an ETF strategy and a strategy that has multiple ETFs.
This gives you that same benefits and liquidity that an ETF structure has. I know many investors in their asset allocation strategy have a slug of cash or cash equivalents. That’s what we can think of with VBIL, at just seven basis points. It’s not draining your portfolio from a fee standpoint, the way that actually many money market funds do. They’re much more expensive than this. This is a tad riskier, I guess, than a money market fund, because it can move off of that… The net asset value can adjust a little bit. So this could be either a strategic position and stay within your portfolio as an asset allocation. Or, if you are nervous about the equity markets and you’re looking for a place to park, VBIL can be a good alternative for you.
Chuck Jaffe: It’s important that if you’re looking at it as a parking space, you’re considering all the alternatives, because the 4% yield is good. But that’s also what the top high yield savings accounts in this country are earning right now. That’s also what you can get from the top money market funds. Money market funds, you might be getting it with additional expenses.
And if rates move, you’re more likely to see a cut. But you also have check writing features and of course internet savings banks while you get FDIC insurance. Are you at all — I mean, obviously, ETFs are your book. So for you, is it “I like the ETF side of things better” or is it “You know what you need… Here’s the ETF option, make the decision that works best with your life.”
Todd Rosenbluth: Yeah. Obviously this is the ETF of the Week segment of your show. And I work for a company that has commentary and research on ETFs and other asset classes. We don’t offer an opinion on savings accounts or CDs or anything like that. So this is the ETF — or this is an example of an ETF — for folks that are moving their money increasingly towards ETFs.
And what we’ve seen in January and February, in the first week of March, is that this ultra-short category of fixed income ETFs has been very popular. With an ETF you get liquidity to be able to make moves intraday, unlike you might with a mutual fund. This is a great vehicle. Many folks have embraced ETFs. VBIL is a new entrant into the space.
There’s iShares and State Street products that have larger asset bases. VBIL is new and VBIL has a lower expense ratio. So that’s why we’re spotlighting this ETF.
Chuck Jaffe: Ease of moving in and out is particularly important for a lot of investors. Is this also a case that… Because it’s got multiple uses and because you might be using it because you’re nervous that this is not the standard, okay. It’s a bond fund, so take your fixed income money and put it here. Again, if it’s a parking place, whatever you’re taking the cash from, this is where you’re parking it until it does the next thing. So it’s not so much about where the money’s coming from, it’s really about where’s the money going next.
Todd Rosenbluth: But I think it’s partly where the money’s coming from. So if you want to reduce the risk of your fixed income allocation and you have core intermediate term bonds, this can be a way of reducing that risk profile by adding VBIL into that. If you have been over-weighted towards equities — or maybe you’re not as over-weighted as you were two or three or four days ago as we’re recording this, because the market is sold off — you’re realizing, “You know what, maybe I don’t want to have as much in the equity markets. Let me move some of that into a cash-like — not cash, but a cash-like — short term fixed income product.” It can certainly go there. As the economic environment settles, investors become more confident in the outlook for the earnings picture going forward. Then this could be just a short term (pun intended) position for folks. So there’s lots of different use cases for this. If this is strategic you can have this on. If this is tactical you might be moving out of this much faster.
Chuck Jaffe: But it’s a very interesting play and a play that a lot of folks might want to know about in times like these. It is the Vanguard 0 to 3 month Treasury Bill ETF (VBIL), just issued at the start of the year, and now the ETF for the week from Todd Rosenbluth at VettaFi. Todd, great stuff. Will see you again next week.
Todd Rosenbluth: See you soon, Chuck.
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And I am Chuck Jaffe. I’d love it if you check out my hour-long weekday show by going to moneylifeshow.com or by looking for it wherever you find your favorite podcast.
And if you’re looking for information on your favorite ETFs, or maybe what could become your favorite ETFs, go to VettaFi.com, where they’ve got all the tools you need to help yourself out. They’re on X @Vetta_Fi and Todd Rosenbluth, their head of research, my guest here on ETF for the Week, he’s on X too, @ToddRosenbluth. The ETF of the Week is here for you every Thursday, so make sure you don’t miss an episode by following along on your favorite podcast app.
And we’ll introduce you to another exciting ETF next week. Till then, happy investing, everybody.
VettaFi Announcement
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For more news, information, and analysis, visit the Fixed Income Channel.
