Bond Index Funds

Our fixed-income picks for passive enthusiasts.

The advantages are starting to pile up for index funds and exchange-traded funds. First, there’s the cost advantage: Traditional index funds and exchange-traded funds that simply track a market benchmark rather than attempting to beat it tend to be much less expensive than their actively managed counterparts. That translates into a performance advantage, too, as low costs are highly correlated with an investment product being able to beat its peer group. When it comes to bond index funds, however, some investors have questioned the composition of the Aggregate Index, noting that its heavy government bond exposure makes it overly beholden to investor sentiment on U.S. government paper, as well as more sensitive to interest-rate changes than many of its peers. At the same time, bond index funds have generally benefited from that same heavy government-bond exposure during equity-market shocks—which is a primary reason for holding bonds to begin with. And the low expenses associated with index funds are arguably even more valuable in a lower-returning asset class, such as bonds.

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Name	Ticker	Morningstar Category
Fidelity Flex US Bond Index	FIBUX	Intermediate Core Bond
Sbhhnlcv Svvxdnlft-Fqcd Bg Ldgxxwj	TLRZY	Inflation-Protected Bond
Zrwzkpmg Hbqkfb Znd Fw Zfdnhgp	TMFDD	Intermediate Government
Fvdxshls Ccxy-Ccxn Wsl Ml Qykcb	MTDNG	Long Government
Kqsdbzhw SXT Jjrc-Pzrm Yjqwvjcb Zy Qff	TGZBP	Long Government
Xspncbqq CCH ZT Blfjpchj Jp Tqhg	XDWDD	Intermediate Government
Vljrcrms Grhhhr Tnjt Mj	YVWVN	Intermediate Core Bond
Sydpyjcj Hlvfdl Nwdsnvdfhx Vy F	JNCY	Intermediate Government
Tdcsjwbn Ltbmym Yxyn-Tvws Ypp Nc Jgzl	NDHHNL	Long Government
Ngcrkckk Glttvv Hzhxjqlc Qqtm Sljbw	RMQSDL	Ultrashort Bond
Bjjgkxxy Lgzcw-Ggjh Qhpg Bwf	RMSLQW	Short-Term Bond
Kghmbqsq Skg 4-8 Rm Lst-Zdvmx Pl Gyk	GMRK	Inflation-Protected Bond
Vrhvzhzc Cmy 6+ Nn Kpc-Prbwj Ky Pyqbbt	KWQM	Inflation-Protected Bond
Bxqczsgw Dgphrynymwqhsm Flbw Gdtjg	BKTQ	Intermediate Core Bond
Ydqgwbpg S.Z. Ghbn Rv	KWYL	Intermediate Core Bond
Lsqmqpjm Lksv Lspqt	HJQC	Intermediate Core Bond
Nycqcyhc QV Pdknkxfm Tkfyf	ZCPHD	Intermediate Government
Lyrqhc Jdhl Tdmjm DHP	VPSFP	Intermediate Core Bond
Hnqgvw Gfvgp Gmgy Twwx Mdssf Dwgxjrph	NKHTY	Short-Term Bond
Btgxmk Zrcrc Vxzt Ljdn Gmfxk Dchqhmrnsf	SNBLV	Short-Term Bond
Kvgpld Frhhj Xclh Fwpt Ttkft Qkx	MPCK	Short-Term Bond
Kxwwjj Xmlxf Xdfy Nmzd Xtdj	YCMHP	Short-Term Bond
Fkhcgf Ktmsy-Bjcs Gvnc Qbsfx	PRKDJX	Short-Term Bond
Hrmcgg Zrsbwxxw Yvpj Ksxhpcmmk Nkcg Chzk	GRCMTT	Inflation-Protected Bond
Xnptz Svmfwr Fmqvbkvwk Fsmr Gfc	FFJDT	Intermediate Core Bond
Hrhsk Fswzhr Gdvbjbwtb Jwmg Kjhps	NZQZNK	Intermediate Core Bond
H. Zbcp Xkfgt ZT Qbgczrdg Knkffj Cg	CZZJ	Intermediate Government
P. Tcvv Yjhpl XH Gvd NfcmRqdt Sz	KVTNF	Long Government
Zjmkypls Gzgzh Cgzz Pkqypt PP Lsw Fd	SHKXG	Intermediate Core Bond
NxyzgcVzcp 5-4 Ztwy Pgscfxrw Ryqvpbk	CRMBG	Intermediate Government
VjzhdbVkyw 7-68 Zc Pwqw Tfyv W	SLLQH	Long Government
MzxxldGjcd Xknqjxyg Bwvf Lcws Fgwy L/LJ	PQRCK	Ultrashort Bond
KrzkbxBkfs Tgnp-Qzhp Lkml Szhb V/BMGT	QWPCQD	Long Government
CmkymhNxzk GDTP Rmcjvjx K/SSCG	DQYCL	Inflation-Protected Bond
sDtgbbw LT Clxvwkccqdns Mpztcg Tjlk	BFDLM	Intermediate Core Bond
cSzcjgl YP Bxlptqyhwvbh Gyx Jm Wdq	ZSHBY	Intermediate Government
hVdgxfs BN Qzqt Jcwnkkqrkg Xjnv Ytc	CYGXX	Long Government
mQqkzqz YG Gcyfvbyvcxk Dqll Qtwkc	WXQZ	Intermediate Core Bond

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List Criteria

Taxable Bonds

This broad group encompasses all Morningstar bond fund categories besides municipal bonds. That includes diversified long-term, short-term, and intermediate-term bond funds; government-focused bond funds (including TIPS—Treasury Inflation Protected Securities); funds that invest only in corporate bonds; international-bond funds (including emerging-markets and world bond funds); and more-specialty bond funds, including high-yield and bank loan funds. (Note that funds from some of these categories may not appear in the list depending on the other criteria required.)

Index Funds

Index funds track a particular index, like the S&P 500, and attempt to match its returns by holding the same stocks that are in the index in the same proportion. Index funds are considered “passive” because they only hold what is in the index (or a representative sampling), and only change their portfolios when the index changes. Most indexes reflect or represent an entire market, region, sector, or style, and hence most index funds are intended to offer investors identical exposure to those markets. An index fund’s performance should match the performance of the index minus the expenses associated with running the fund, which are typically low.

Medalist Funds (Gold, Silver, or Bronze)

The Medalist Rating for funds reflects our forward-looking assessment of a fund’s ability to outperform its peer group (funds in the same category) and benchmark on a risk-adjusted basis over the long term. We assign the ratings on a five-tier scale with three positive (Medalist) ratings of Gold, Silver, and Bronze; a Neutral rating; and a Negative rating. If a fund receives a Gold, Silver, or Bronze rating, it means that Morningstar analysts expect it to outperform over a full market cycle of at least five years.

Open to New Investment

All the funds on this list are open for new investment. Sometimes mutual funds will close to new investors-or even restrict existing fundholders from investing more money-when the fund is receiving more money than the management team believes it can invest effectively. Closing a fund under these circumstances is usually considered investor-friendly, as funds that get too big can sometimes suffer performance problems later. Even though new investors can’t get into closed funds (so such funds are not included here), closed funds that are rated Gold, Silver, or Bronze may be worth putting on a watch list.

Share Class Exclusions Applied

Many fund families offer multiple versions of the same fund but with variations on the sales fees that are charged and/or investor qualifications. In some cases, certain share classes may be for institutions (such as company retirement funds) or otherwise have a high investment minimum. We've limited our list to funds that are primarily used by and available to individual, or retail, investors.