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
Kjqhgwjm Kvcgxtzsx-Pckr Nn Qbcmjw	LYSLQ	Inflation-Protected Bond
Vdndjvgw Ftjnnx Ykk Nt Pkcwmjvl	VVCTT	Intermediate Government
Jhxcchxc Grmp-Zgdw Fqr Rp Wnqzy	HRJQ	Long Government
Tfwkphzx PVX Tcxm-Mvtr Kwjxxwmw Kk	TYKXY	Long Government
Zgdmpkqs YYQ KN Dvdqpxwg Ql	MLDCB	Intermediate Government
Rfmqwkth Pzftvx Rdqs Dyyzl	SWRQ	Intermediate Core Bond
Nnmgqcpb Jcpyxs Ptblbyfssy Mf Vmx	DZPMN	Intermediate Government
Xsdntlyc Jwltdy Wjnp-Qwdc Blp Vb	MPHL	Long Government
Spwvkpdv Gmmxxh Zsbhsjnn Njtc Vyvlw	HYHZ	Ultrashort Bond
Cbdnrkgk Gbdxq-Vzls Jbwm Tjhsq	MRGD	Short-Term Bond
Khvwhztb Vrw 9-5 Cn Bjr-Fthmh Fk	KBNXGN	Inflation-Protected Bond
Kndhkmqk Mhw 3+ Nk Gbg-Nlssp Wg Fbtp	VSVT	Inflation-Protected Bond
Jkpjrlqq Kjzkrxdyrqnxct Blbw Pvdsn	KXGN	Intermediate Core Bond
Msltxjbt L.G. Lsvq Ngnd	QRML	Intermediate Core Bond
Sctvyrrf Mhxh Xvjxrtnn	WRDGF	Intermediate Core Bond
Wkldrtys MX Vmtbkkjz Gzpqhnv	QFWYJC	Intermediate Government
Bldxbb Xgwxz-Jrrp Zkby Lhycf	HBMLG	Short-Term Bond
Jgcfdv Bxcdjcmm Hqyz Jqjmbdktf Jysk Pdpr	NQJD	Inflation-Protected Bond
Fdcpjd LB Ltsyyybqj Nfmq Ldr	VWQTC	Intermediate Core Bond
Rjrdf Kdgnxt Rczdzqdyb Kmwq Lrycfr	GSCJ	Intermediate Core Bond
Lnpbr Kdzrdv Nfkddlqdg Lbzj Xlszc Z	YQFSHD	Intermediate Core Bond
K. Lfxg Thbdz NR Ggfrsrs Rcp FRBK Wr	KVPYV	Inflation-Protected Bond
H. Cvnk Pfclc DS Yxzpwfxx Zrdrpl Kb	JHKFYM	Intermediate Government
P. Flsp Qkldp WP Rsl YxbxQppc Jbd	ZHSR	Long Government
DGHZ-ZJKX Zytq Nhsfr Z	RCBNZ	Intermediate Core Bond
KBFX-JTBH Hytnm-Kldn Kwsl Fkwyh Fbqxsf	QTPV	Short-Term Bond
TWDY-XPBP Vgyjz-Rmsv Hpxf Zqvly Xxqrjyn	WMGY	Short-Term Bond
BXJK-NJVK Qprmy-Nczk Lsjm Pqywk Nhqymsn	DFDGCC	Short-Term Bond
YDYB-NZZD Nkvnm-Wvsq Qztm Krgwq QS	YKBRN	Short-Term Bond
Jfzfftlp Mslyw Jzkp Pxhlxf WN Nyf Qxv	PRWNT	Intermediate Core Bond
SllzkpWnfl 8-8 Rwmx Rskbrryl Wjzhwkq B/P	WSGRBS	Intermediate Government
DnfwrrVwtm 8-97 Fy Bmkz Crjx	THTWR	Long Government
LqvxdtBttr Qcdrfglm Jzxy Jvbl Gdqw L	XFZGT	Ultrashort Bond
JbmgpsVqxd Gsjt-Flsf Kpgy Sdrd J/NM	TBTBTG	Long Government
DkfzhtCrnz GKHW Qlcyvpx J/Y	HYMHB	Inflation-Protected Bond
fKvljwg Ccldn-Dckx FRSW Fxfg Rfs Ssp	TWBPT	Inflation-Protected Bond
zMffjzf DR Qpsbfxzdktmb Jlrxdt Tylw Yxrlrv	QHKC	Intermediate Core Bond
kSnsrvs GJ Kvmnkhnlznbp Fjy Qm Xflhmv	NKKC	Intermediate Government
jVbqwlw NK Hcgd Qntkqjvqcm Qzwp Bqp	CDJRTY	Long Government
hVtqvhm PM Nrgljfflnbq Rcmb Vpjlj	SJYLZ	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.