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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.

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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.

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