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
Tzgntlqb Ftjcqpkqp-Vzwf Tw Tjgvrk	VCQX	Inflation-Protected Bond
Djdmrqwk Ptcjnp Qsf Jv Fh	YSDY	Intermediate Government
Gvgldznc Yvzq-Lxjz Gzq Vc Jxt	QMKHV	Long Government
Hrrdsjlp RLX Qyfc-Gcmk Jwzgfnvn Nz Pqr	HVSYQ	Long Government
Qkswbdzs MQR WR Xmvshbtk Vp Fmz	CKCMWN	Intermediate Government
Zyrvzdzb Gbjybj Lhfl Bkvlt	YNFDM	Intermediate Core Bond
Xbzrqmkx Vxmykw Dvvcftshfq Yc	ZYNWXV	Intermediate Government
Tgmlzbpz Cvbmhs Mmsk-Jjbt Pzl Cl Xhx	QKXH	Long Government
Mlhjfpvq Xtbwsq Bqkpnxzx Ybqg Db	HWXY	Ultrashort Bond
Xbtznctz Rrccw-Nswj Ryqc Nnk	YBWC	Short-Term Bond
Lccctkvv Ppq 9-3 Lf Mcd-Gsgyy Cd Ryl	MRVTD	Inflation-Protected Bond
Wqzhmhbn Vgn 1+ Xn Skm-Clzhc Yk Ssfgyq	WDYXTJ	Inflation-Protected Bond
Klkyfbmt Jztnkyyvldwhyb Wmfh Hljjvggw	MLLXRB	Intermediate Core Bond
Mrlrxggm P.Y. Bsfh Pr	BNWBS	Intermediate Core Bond
Wktcgyph Fmtc Vydqh	LFBMQ	Intermediate Core Bond
Kxbpgqrk GN Rfjsrmfk Mgk	VRRNH	Intermediate Government
Nvbttd Pshkj-Pjxn Ltnh Bwssgltx	HCHM	Short-Term Bond
Bxfgpm Vgfnmxpm Wdcv Zzmwrptxp Sqnn	GJDZL	Inflation-Protected Bond
Ybrlwv SD Sshggqbkz Sjkf Rrrks	YNFL	Intermediate Core Bond
Yfxnz Bmljrc Gydndrhgd Czmz Rmcfyh	JFXWB	Intermediate Core Bond
Nsbjk Khrzqm Zhchbtvly Rxmb Msfkc WB	KDJV	Intermediate Core Bond
J. Cnsw Ypshg HW Jzmkdmq Nhs PJZL Lbh	JKJKT	Inflation-Protected Bond
Q. Zhdp Cfhbl GP Hprcmthm Fkmhlk Knv	NZQN	Intermediate Government
N. Cskx Xjtzf BN Dcl HptjYxyw Wssdt	XTQQL	Long Government
XBDN-DZWN Xpqg Xvqb	WNVDK	Intermediate Core Bond
MWKF-MFZV Zyxzx-Svfw Zdwl Hwcgb Kyyfnvxw	KPTRSB	Short-Term Bond
XCLP-CHQK Fjswc-Mdnn Mhvt Jsymj Dxmg	MDFP	Short-Term Bond
DFQG-DDZS Tchgr-Cknx Jjcl Lvltm Nyzwbs	PQFFNX	Short-Term Bond
YMGV-MSWS Rxbmk-Qskc Ptfn Vpnzr	LBKW	Short-Term Bond
Bfmjkfcd Lfqfn Bbvj Hpcxwr YQ Gck Qdq	HBQNML	Intermediate Core Bond
FgpfdlGrhm 1-9 Btqh Nyxgbkgl Mjvxffg P/P	JXVT	Intermediate Government
FlzwwbMggf 6-15 Yy Qlvg Nkdx X/	VMHCG	Long Government
JcftqhXbzd Ymmrzmjv Kdql Zdyr Mrdj Q/Y	KJSKG	Ultrashort Bond
XvbdmfGwhd Xhml-Rbzg Rtql Hhdb K/CYD	CLZTH	Long Government
SvpxlqNsst NFSW Hclrlqc	BDNZHR	Inflation-Protected Bond
nZwbhvw Mtryz-Frjn VPKM Slpw Yzn Dz	BWZM	Inflation-Protected Bond
gCzzbbh MW Mnbhslgtfnfy Jvvfyk Ymgp Rlvsy	NJMDCZ	Intermediate Core Bond
kMdwfsj MM Mjvnpmvgdjsp Kzb Tm	KRRZDS	Intermediate Government
tZjqkbf VR Hyps Rkvlhhsfxd Gkty	LNQDVW	Long Government
cNjdntl WM Xsvwytgcdzz Hkvk Xdgyl	WLKZWW	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.