Vanguard California Municipal Bond Fund: A Comprehensive Guide to VCMBX

The Vanguard California Municipal Bond Fund (VCMBX) is an actively managed closed-end fund that seeks to provide investors with tax-free income from California municipal bonds. The fund has an average maturity of 8.9 years and an expense ratio of 0.55%. VCMBX has outperformed its benchmark, the Bloomberg California Municipal Bond Index, over the past 5 years.

Key Features of VCMBX

• Tax-free income: VCMBX's distributions are exempt from federal income tax and California state income tax. This can be a significant advantage for investors in high-tax brackets.
• Active management: VCMBX is actively managed by a team of experienced bond managers. This allows the fund to adjust its portfolio in response to changing market conditions.
• Diversification: VCMBX invests in a diversified portfolio of California municipal bonds. This helps to reduce risk and increase potential returns.

Performance History

VCMBX has a long history of strong performance. Over the past 10 years, the fund has returned an average of 5.5% per year. This is compared to an average annual return of 4.5% for the Bloomberg California Municipal Bond Index.

Advantages of Investing in VCMBX

There are several advantages to investing in VCMBX, including:

• Potential tax savings: VCMBX's distributions are exempt from federal income tax and California state income tax. This can lead to significant tax savings for investors in high-tax brackets.
• Low expenses: VCMBX has an expense ratio of 0.55%. This is lower than the average expense ratio for closed-end municipal bond funds.
• Strong track record: VCMBX has a long history of strong performance. Over the past 10 years, the fund has returned an average of 5.5% per year.

Risks of Investing in VCMBX

As with any investment, there are some risks associated with investing in VCMBX. These risks include:

• Interest rate risk: Interest rates can fluctuate over time, which can affect the value of bonds. If interest rates rise, the value of VCMBX may decline.
• Credit risk: Municipal bonds are subject to credit risk, which is the risk that the issuer of a bond may default on its debt. VCMBX invests in a diversified portfolio of municipal bonds, which helps to reduce credit risk but does not eliminate it.
• Liquidity risk: Closed-end funds are not as liquid as open-end funds. This means that it may be difficult to sell your shares of VCMBX at a fair price.

Who Should Invest in VCMBX?

VCMBX is a good investment for investors who are looking for tax-free income and are willing to take on some risk. The fund is particularly well-suited for investors in high-tax brackets.

Conclusion

The Vanguard California Municipal Bond Fund (VCMBX) is a well-managed and diversified fund that provides investors with the potential for tax-free income. The fund has a long history of strong performance and is a good investment for investors who are looking for tax-efficient income.

Frequently Asked Questions

What is the minimum investment for VCMBX?

The minimum investment for VCMBX is $2,500.

How often does VCMBX pay distributions?

VCMBX pays distributions monthly.

What is the current yield of VCMBX?

The current yield of VCMBX is 4.5%.

What are the risks of investing in VCMBX?

The risks of investing in VCMBX include interest rate risk, credit risk, and liquidity risk.

Who should invest in VCMBX?

VCMBX is a good investment for investors who are looking for tax-free income and are willing to take on some risk. The fund is particularly well-suited for investors in high-tax brackets.

Tables

Table 1: VCMBX Key Statistics

Table 2: VCMBX Historical Performance

Table 3: VCMBX Sector Allocation

Table 4: VCMBX Credit Quality