Always concerned about the perils of having too much of a good thing, Vanguard has closed its ( VWEHX) High-Yield Corporate Bond fund to new investors.

As corporate bond yields went steadily higher, prompting heavy inflows, Vanguard sounded warning bells regarding the hazards of market-timing and noted that bond investing is hardly risk-free. But despite the cautions, investors poured $1.4 billion (net inflows) into the $9.2 billion fund in the first five months of this year. That's roughly double the amount that was invested during the previous five months.

"It's a prudent move," says Morningstar analyst Jeffrey Patak. "It's not a real common occurrence to see a bond fund close, since the markets are more liquid and they don't have the same constraints as equity funds. But Vanguard had concerns about the time horizons of the new money coming into the fund."

When inflows into a fund in a particular area increases rapidly, that money is often the first to be yanked out when another area becomes hot. As the market-timers move in and out, longer-term investors suffer the ill effects of the active investors, such as higher trading costs and increased capital gains. Vanguard has historically protected its long-term investors from the ravages of market-timers -- making Vanguard more prone than most fund companies to close funds in hot sectors. Most recently, Vanguard closed its ( VGPMX) Precious Metals fund in June 2002 for similar reasons.

"Investors continue to commit considerable assets to our fixed-income funds and, in particular, Vanguard Hi-Yield Corporate fund, despite our ongoing educational efforts focusing on bond risks," Vanguard Chairman John Brennan said in a statement. "The performance of the lower-quality corporate issues has been quite strong this year, enticing investors to high-yield funds in great numbers."

As yields on corporate bonds hit unusual heights in the past year, Vanguard published several articles on the risks inherent in bond investing, and it has actively discouraged market-timing. "They've gone to pretty unusual lengths to keep investors from hurting other investors," Patak says. "And now that includes closing the fund, which, all told, is a positive move."

The fund will be closed to new investors for a minimum of three months; existing shareholders will be restricted to $100,000 in additional purchases per year. Vanguard's board will reconvene in three months; if the unusually high investor interest has subsided and cash flows have returned to normal, it will consider reopening the fund.