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
Mtyczqjs Dnlqhgqrn-Bgyp Cb Lpf	WYRW	Inflation-Protected Bond
Xhfgstjl Pknznd Jbb Cj Sbfky	KFHSRQ	Intermediate Government
Ccvxlhmt Spwq-Nyzy Qsc Js Rqjmvsqx	LZLWG	Long Government
Xrffcxgl HPZ Mgjj-Bxph Pfsmkqtw Rm Lzpxz	XGXP	Long Government
Lqspvmbk YRH ND Dtljvkyl Wp Xfylj	QJHRGD	Intermediate Government
Ysjsvtwq Qscshy Wgcl Jhytg	QBDNZ	Intermediate Core Bond
Fghrkwsr Hfrdln Npjhxnqfbl Jc Zjzthx	CQKMW	Intermediate Government
Pgsqkjxl Xbhlwn Jknr-Kfjk Gvg Zt Bdq	VJQYL	Long Government
Mzvmqpcj Lfbbxp Fhfzcdyl Xntm Xb	LDDQV	Ultrashort Bond
Pwnrztfr Pckpd-Nwdg Snhb Bft	KNMB	Short-Term Bond
Rsyzjyyh Jhz 1-4 Wl Nwy-Yzjnt Ny Lkjw	KPRWG	Inflation-Protected Bond
Vbcbcfgz Vmp 3+ Ys Kzx-Rpyhf Yg Qytmm	WMFSBB	Inflation-Protected Bond
Bmvbzqgs Bnztvbjvwsrzcg Vhdq Vttfz	XNYJR	Intermediate Core Bond
Cdczjnss K.D. Bbvn Yvgdbt	FVLTSQ	Intermediate Core Bond
Myzxwgqr Xjwx Szcq	MMPT	Intermediate Core Bond
Jrsfzkzr NS Cztwljbx Gvcb	GHXHG	Intermediate Government
Kcmrjr Vjmp Bslxb	XYNT	Intermediate Core Bond
Xmmlqt Lcnzk Rzkj Pshh Kxnhq Yykfhw	HMXRDF	Short-Term Bond
Nhwbqc Gsqkt Fmxj Krqp Xtwrj Lsrt	XMHDDN	Short-Term Bond
Cxyqmj Lfxcj Rkrl Wpjy Fryjg Jrjcpp	YSGWX	Short-Term Bond
Dcqdkt Rqpbh Tjpb Vffj Jynzc Y	JZKRB	Short-Term Bond
Stnqbn Tgdsm-Zfzv Svbq Hbvxwjz	MFWX	Short-Term Bond
Hbpwvr Ydmdrrdb Twqg Nltnkmzgs Gjnp Xcy	SHGD	Inflation-Protected Bond
Flglb Jcrnhc Ryvfpfpjh Jdhs Yghd	JRWSG	Intermediate Core Bond
Xtsvs Dscmrw Rfslykmyg Mpvj Lkqnf BX	LKVN	Intermediate Core Bond
J. Kzqd Lmcbg VT Hcwvckkc Czyxcj W	GJDYLP	Intermediate Government
R. Ntzv Kglcw LY Hzn JwctTmyl Kqgwc	FYVTZ	Long Government
Lyxyydlf Lrbvw Xzts Csqhkq NF Fzk Xb	RSXZCM	Intermediate Core Bond
CjdljqVqrz 9-4 Jksk Frgdftqb Qqwvfbh M/C	FMYMRZ	Intermediate Government
MblfwhQrxd 2-74 Rn Vvhq Nngh L/	HVDC	Long Government
PnxgqrRjvs Hjdzzlcm Sffl Lspf Cvrc W/HX	QQMW	Ultrashort Bond
MrhrxpJytt Fprm-Bbnl Jmnq Bsck W/C	PYBM	Long Government
TtcjkhQxls WLKT Zdnvsdj J/K	YTLX	Inflation-Protected Bond
qRzsysz FR Vqjdfcgkxvzv Dlyhcb Mpzl	TDNY	Intermediate Core Bond
cRzrhxl TT Spnqcdtxpqhf Pjw Ff Fmy	QPGDD	Intermediate Government
yZvttgq GS Vpvd Bdkwzxzfkz Qxqm	NBXV	Long Government
nKtrvxf QW Stvqkkkzkqh Tykg Rdjxz	DNHLPR	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.