Vanguard Short-Term Tax Exempt Bond ETF

Vanguard Short-Term Tax Exempt Bond ETF (VTES) tracks the S&P 0-7 Year National AMT-Free Municipal Bond Index. That index holds investment-grade bonds from US states and local governments, and their interest is free from federal income tax and the alternative minimum tax. The fund's 0.05% expense ratio is well below the 0.16% average for similar funds. Short maturities have kept price swings small: its deepest drop was about 3% through October 27, 2026.

• Over the year to Oct 27, 2026, VTES returned +1.6%, 7th of 8 among similar funds.
• Its worst full calendar year was 2024 (+1.8%); its best was 2025 (+4.2%).
• The deepest fall in its price history was 3% (Feb 27, 2026 to Sep 29, 2026), not yet recovered.

As of Aug 31, 2026, the fund held 3,437 securities; the ten largest made up 4.92% of assets, and 3.25% sat in cash and money-market holdings.

The bonds mature in 4.3 years on average (weighted by size), with an average coupon of 4.83%.

• Over the three months to Aug 31, 2026, investors added a net $438.7M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: +0.34%, -0.55%, +0.42%.

VTES is an index fund. It aims to match the S&P 0-7 Year National AMT-Free Municipal Bond Index instead of picking bonds by judgment. The index covers investment-grade, fixed-rate municipal bonds that mature in one month to seven years. Municipal bonds are loans to states, cities, school districts and public agencies. Their interest must be exempt from federal income tax and from the alternative minimum tax (AMT), a parallel tax that can catch some higher earners. The index leaves out bonds from US territories and commonwealths.

Vanguard doesn't buy every bond in the index. It uses sampling: it holds a selection of bonds that, taken together, approximates the index's key risk factors. At least 80% of net assets go into bonds from the index. A fundamental policy also keeps at least 80% in securities whose income is free of federal income tax and the AMT. As of August 31, 2026, the fund held 3,437 bonds, and its ten largest positions made up just 4.92% of assets. Seven of those ten were State of California refunding bonds.

The fund keeps its average maturity close to the index's, which normally shouldn't exceed four years. The index's figure was 2.6 years as of November 30, 2025. Shorter bonds react less to interest rate changes, but their income can drop faster when rates fall. Tracking the index could also make the fund nondiversified, which lets a few issuers carry more weight.

• VTES charges 0.05% a year, versus an average of 0.16% for the similar funds below (3rd of 8, cheapest first).
• Of that, 0.04% is the management fee; the rest covers other fund expenses.
• Using the prospectus's standard example, $10,000 invested would cost about $5 in the first year and $64 over 10 years (assuming a 5% annual return).

Its short-maturity municipal bonds have produced small price swings and monthly federally tax-exempt income rather than growth.

VTES could act as a low-volatility reserve for money needed over the next few years, with interest free of federal income tax. It launched on March 9, 2023, so it has no record through the 2008, 2020 or 2022 downturns. Its worst calendar year so far was 2024, which was still a gain of 1.81%. Its deepest drop was about 3%, from February 27 to September 29, 2026. It had not recovered as of October 27, 2026, so a retiree who sold shares during that stretch would have taken a small loss. The trailing 12-month yield was 2.67% as of October 27, 2026, paid monthly. In the SEC's standard example, the 0.05% expense ratio costs $64 over 10 years on $10,000. Past results don't predict future ones, and a plan should look at the whole portfolio, not one fund.

Matched by bond funds with the closest average maturity and issuer mix (N-PORT).