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ETF Specialist

Alternatives to the Aggregate

As the bond market’s barometer has become increasingly conservative, new indexed options have emerged.

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The Bloomberg Barclays U.S. Aggregate Bond Index is a broad, market-value-weighted index that includes U.S. dollar-denominated investment-grade corporate, government, and securitized (for example, asset-backed securities, mortgage-backed securities, and commercial MBS) debt with at least one year until maturity.

A passively managed fund replicating the Aggregate Index is a good option for a core bond holding. Given its conservative composition, returns will be less volatile than and uncorrelated to the equity market. The four exchange-traded funds in Exhibit 1 track the Aggregate Index (Vanguard Total Bond Market ETF (BND) actually tracks a float-adjusted version). All four have earned a Morningstar Analyst Rating of Silver on account of their broad diversification and low fees.

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