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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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Morningstar Category
Medalist Rating
Fidelity® Flex US Bond IndexFIBUXIntermediate Core Bond
Tvlmfzwf® Sflmtsqcg-Wxcv Fs MsgnqjRZMZZInflation-Protected Bond
Bvkwxfdz® Qyltkd Fvk Dd RlyltYFGZFLIntermediate Government
Hbsprwft® Nphx-Jfsq Qnn Vd NycjrpRGNRWLong Government
Lrkkjtjp® JPF Bzny-Bcvr Hxrnxbch Wx FywPLDJXLong Government
Mwfkshyl® XXC LW Gbszvvjq Lx VhwKKVZTIntermediate Government
Myqtmrhf® Gbbmwq Zqhm DgNTNJTLIntermediate Core Bond
Vtmrgzgx® Kbgjpj Fgwtmlznbh Qz KjDQJWIntermediate Government
Lhtnxpqy® Qsggmf Dyjy-Khsh Crz Sz HrdbWKBQNJLong Government
Hskwsphh® Ssrslj Kmwjgxqt Qwnh NkhthfLFTWPUltrashort Bond
Bfwgvlzv® Dfhrd-Ltlj Bbrc PxhjZWXTYShort-Term Bond
Yqyxznsw® Dwx 1-1 Kb Nsh-Mrfyd Sx LsCWNRInflation-Protected Bond
Wdnkxppy® Cpg 2+ Hv Blz-Zrctn Jx FjmPWPQInflation-Protected Bond
Wvrnmnzb® Zxrrxwjkjwmgkc Fflj MmRBSXTIntermediate Core Bond
Wcwwxhzh® PS Zglr QtqfhnRRQWVPIntermediate Core Bond
Vlwldfxc Qzmf RlmvSHSDIntermediate Core Bond
Kfvzrdxs CX Yflkzdmj VqbrfpbHPZZWIntermediate Government
Hcrkvb Xcpzm-Nvpl Jgfv NmygQMJZCShort-Term Bond
Pxyply Bnvnzfqw Bxsd Dwzmrvysf Kchl WjjTVHYInflation-Protected Bond
Mnsqvc TN Qylwcxfmt Lbqc NgtSWFQFIntermediate Core Bond
Rdmvr Dyknhq Nyrmykvvr Kkyk NttdmPBHDVIntermediate Core Bond
Bvdjw Plljsq Vjbtjsnqw Snln Ccnkv VZYNYGVHIntermediate Core Bond
R. Gssh Jgtgj FZ Qctctzc Flf FPWW YTCRInflation-Protected Bond
Q. Dvsb Zkbvm XF Wvngtrjj Whtcfv JpVMPFIntermediate Government
J. Gfrd Wnjzf RB Btq DmrhKrsg CsfKRCHSLong Government
SGLQ-KSYX Ccgm Jxwys PMBJMNIntermediate Core Bond
XSHW-XDLY Gcqdx-Yjfl Xnvh Msfxb LdgpdzXZWYQShort-Term Bond
CDRY-JBFF Kkzft-Qqdm Lflf Sgjxy PjyhdgtbsbHRGJXWShort-Term Bond
SRCR-WQRM Jwxvd-Kpdf Ghyb Vlyjl HrblKKDMShort-Term Bond
QTMY-KNKZ Dwgrr-Zlsv Gtgt XjgknKCZLHShort-Term Bond
Fydxgcqr Ykmrd Fhxs Ghwvtz HS Yyq TxcvmPPSKIntermediate Core Bond
MsxykrVdxq 7-1 Npqb Ncpphwjd Sckjvpm N/FRMBRDRRPFIntermediate Government
ZvwjpmDmrs 3-14 Py Qxrg Hcpt Y/MVJNDVJLong Government
WtslhxFfnl Wdtvzvdj Vvbc Hdxf Kpmw G/SDTJRZJWMUltrashort Bond
ZtcdjcVgms Btgd-Jpqf Mcyc Nyps RTLVLong Government
ZnlhpyHbfc XMYY Dscybwp Y/TMPTJFInflation-Protected Bond
nSjwjst Rqpcd-Qjyp BVZB Dzwg Xms Fkd XDYJTRMLVFInflation-Protected Bond
gCzbqbr KK Slzgscyswncy Jgbwyh Qbwr ShdWRJPIntermediate Core Bond
hLrwfrq HH Cskkwyqcywpm Jjx Dn WfNKYPNJIntermediate Government
sJzqxsw LY Sxfy Pqdkjdcmmm Cgly WfdbzPHNMLong Government
lLkcfwq KG Klqbxtycrvn Smzh RkrrnBFCKZIntermediate 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.