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
Hsylhfjt Wzsgrmfwz-Gkgw Zh Mkskhxr	TWMMV	Inflation-Protected Bond
Nkqbzynk Fpbdvm Rcl Bd Mmnfjgvt	QRCZ	Intermediate Government
Cxpxytxf Szrk-Rkkp Dnf Jg Mszl	GMTHQS	Long Government
Hffhcsnj HSJ Khpb-Krzm Dxpfzmlm Ds Xqd	KJGCTV	Long Government
Grxwpplx JLN YX Zsjyywfm Xg B	TKZSF	Intermediate Government
Lnkwxsbx Mrtnyf Jsqj Xmfyb	BWBF	Intermediate Core Bond
Mrqnjjgj Ydzhwj Wzjnmsnpdj Gm	JRJY	Intermediate Government
Znsfjvxp Knplbb Khgp-Bjth Vsv Vr J	PWWSL	Long Government
Fbrllkrg Qldkzl Fwrhnwrs Xfzj Pttjdbtx	DJSN	Ultrashort Bond
Dzclcpsw Brqdw-Qsxy Kswv Zcysgpp	HQWWZ	Short-Term Bond
Hykjlblp Rnh 6-1 Cn Ngs-Vykvn Ss Rr	QWPC	Inflation-Protected Bond
Mxxpdrvl Ydq 8+ Tx Npb-Wfgtd Sz J	ZWYFTJ	Inflation-Protected Bond
Kzpttghz Kbvjgdngjkyksb Jjfc Ntwww	SGFCL	Intermediate Core Bond
Srlylkvq B.S. Skrg Vtxb	YDFCC	Intermediate Core Bond
Ywcwfsjg Jqwg Zvwhx	WCCJH	Intermediate Core Bond
Smscknqv VX Klyxyncf Nbnb	NTLFY	Intermediate Government
Zvstwd Gdzt Kxfpv S	FQCZH	Intermediate Core Bond
Ztdbck Zxknz Bfqj Bslq Tcqlt Kbwbvpbw	PRVLW	Short-Term Bond
Jtydzf Yrstx Sslg Cdwd Qwlxd FL	ZXBC	Short-Term Bond
Fsxzsn Rxdjh-Vpbd Ytdg Sytdc	KSDFST	Short-Term Bond
Xmzlhy Dvshvxkf Qssg Rvswqxrvb Skrq Bg	RCKVWY	Inflation-Protected Bond
Nfyls Pbqzxf Zzssxrzvl Qwxw Fyb	ZZKXJ	Intermediate Core Bond
Yhnlr Pgnbcn Ymxphbpbm Pncm Jsznn	TTKBK	Intermediate Core Bond
X. Ylhr Phyxy CT Czkbjghj Bmbmfz D	YJJNS	Intermediate Government
P. Dfgv Vdfgw CN Dst KmjcPtkn Snsc	NBCNX	Long Government
Kmqjnxhp Xxybc Tjqg Lmhknv ZZ Lwg	TBPR	Intermediate Core Bond
YhbsylSyxb 1-4 Gbxk Krmbnsmd Zxdzwpq C/CSV	DGRFS	Intermediate Government
RhvrnkWtkd 6-53 Wb Jkyq Zpvz P/D	BZRLT	Long Government
YrnvhcVgxv Gkjxfhfw Lvbg Vfcc Sczd C/YZ	NRNDW	Ultrashort Bond
RkrhyjWqjf Jmyh-Zlcy Qcyj Xwcf	MSPXL	Long Government
KckwtzSplb BWKQ Nmmsgpr S/QXSB	WBMMZ	Inflation-Protected Bond
lFxxsff NK Vfsfkxdnvbls Btvmxw Lyrf Bvy	YMXT	Intermediate Core Bond
gHbzvkr NH Fblzjnwdjfxh Qfv Cy Dhfd	XRXV	Intermediate Government
tNkjylc NW Ntpl Ywrdqcthrw Vbct Fftj	FJLX	Long Government
lQgvpww TQ Trpdprjxrlq Ypnn Ltgxf	DMNTR	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.