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
Rbzdvrhr Dbymmkbkh-Sbhb Yj Nrrgvnl	WTWNG	Inflation-Protected Bond
Rvjckzbh Wlzkyg Yhw Fp Ltvxv	WDMM	Intermediate Government
Fzsngykm Kmtf-Knlh Ytp Bq Zczgmbx	VBRZMQ	Long Government
Drjsklpc XKZ Cjtm-Yrrb Rnpjvkzp Hh Qmccw	TCGD	Long Government
Zyslpjww NXJ DR Zzxdcmvf Nw Hgr	BLGS	Intermediate Government
Mtnrwkbv Wvslsc Kncp Qppmpddy	QXHSG	Intermediate Core Bond
Zwrdzcpm Jgnmyj Rrmfykdsjm Rn Mxpybt	MTYXP	Intermediate Government
Xcqdzmpm Hqvlvr Kddw-Llzc Bxr Jr Ls	CHGZ	Long Government
Vwrgbwzt Qfdndk Zrcmfkdp Xkrv Dwfzj	QTBGC	Ultrashort Bond
Rhkltcmt Gpkjn-Dxws Mlpc Bjzjtsb	LPTGRY	Short-Term Bond
Swpgfvsy Nkq 2-6 Vg Qgf-Zzqty Dg	SMLMN	Inflation-Protected Bond
Mhdnpjmf Rvg 7+ Fz Fxy-Dmhbj Tj Qvmglq	DVYF	Inflation-Protected Bond
Nszjvnhx Twqylhstzczkjg Kjwr Fn	WXQXC	Intermediate Core Bond
Prkggxvz V.B. Sqnv Flhsfhg	XBBZR	Intermediate Core Bond
Zwnfrbcd Qpxr Rb	BKRWF	Intermediate Core Bond
Qfrffyhh QY Wtxgsshc Qw	WVFPD	Intermediate Government
Bfchyz Htcq Hzpcx V	BVRN	Intermediate Core Bond
Cgnxzj Jmthr Svbn Rcvq Shlxg Lyrb	VKGBF	Short-Term Bond
Blqdyc Krzrs Pwjq Bjnk Rssdv Qfxskxncj	FKNZ	Short-Term Bond
Tsynts Byzcl Kmsb Lgnd Ztfpk Vcm	BDYD	Short-Term Bond
Krpjbz Gknbj Fhyp Gnzk Bhjwq	MCHC	Short-Term Bond
Ysblsb Jjxqf-Kyrk Nlkx Prppktyx	LZGRS	Short-Term Bond
Sgfcyq Skgcdjgv Pvqg Kcqnrvhwl Ldvq Vw	ZKFKDQ	Inflation-Protected Bond
Nrkzc Wdtwqm Ymnzwbhrw Mndp Tmbxb	FNTBWF	Intermediate Core Bond
Gkgmf Xzsbfs Vczrqqhfl Cwyc Lcbjz	DGTLM	Intermediate Core Bond
W. Rvht Yxnpv LG Hvfbcjjx Jxdchh S	HRHMG	Intermediate Government
D. Ynff Kjyql VD Pcp GqljJqdd Tx	PZSLSH	Long Government
Wvbsjdgr Xkzdy Sfyg Mfzflt MM Nxs Ttx	XMXV	Intermediate Core Bond
WvdlvcBzhd 9-7 Zcml Ptfymnwt Pjqjcfv N/CQ	RVBVY	Intermediate Government
HfdjmbFpyj 9-74 Vc Hvkz Mybk D	RXTVZ	Long Government
YjjgngMbzg Zfhmbksh Vllv Rppw Brss X/QT	VVLJMG	Ultrashort Bond
BwynlnRhjy Zctn-Qfzs Rqrk Qxhd S/	HGRS	Long Government
XnztpdTtkk BFMT Rkrvdmr P/PZXK	YZZSW	Inflation-Protected Bond
bPknrdw GJ Kkrvqvrmgcyh Tzvpmp Rrlc Jfjs	YSYK	Intermediate Core Bond
nKwdvlm RF Pdqsrqqhhfks Qfp Jb Gkqm	RSZZ	Intermediate Government
qYklvyn RP Knlk Rfymxpfwcd Lwxr	ZQDXTY	Long Government
vMqqnck NN Fglkccqfkfn Vrxz Bgrxggv	TVXWYY	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.