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2 Flavors for Core Bond Indexers

IShares Core Total USD Bond ETF takes on more credit risk for higher yield, while iShares Core U.S. Aggregate Bond sticks with higher-quality credits.

2 Flavors for Core Bond Indexers
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Tom Boccellari: The Barclays U.S. Aggregate Bond Index is one of the most widely benchmarked fixed-income indexes in the world. It provides investors with a broad array of U.S. listed fixed-rate investment-grade bonds and covers the U.S. government, agency, corporate, and securitized bond sectors. However, many active managers in the intermediate-term bond Morningstar Category invest in high-yield bonds and foreign debt to achieve extra yield or better total returns.

Investors looking for a passive offering that combines investment-grade, high-yield, and U.S.-dollar-denominated foreign bonds may consider iShares Core Total USD Bond Market (IUSB). Tracking the Barclays U.S. Universal Bond Index, it includes all of the constituents in the Aggregate Index; however, it also includes high-yield corporate, eurodollar, U.S.-dollar-denominated emerging-markets, 144A securities, and a broad swath of commercial mortgage-backed bonds that are excluded from the Aggregate Index.

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Thomas Boccellari does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.