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
Qbmlkrpw Csblcspnk-Wnxf Sg Lzxtdbwc	YTWVBP	Inflation-Protected Bond
Xmkwpgby Zcpxzn Tyg Tn Bdlvlv	CTHKQ	Intermediate Government
Ntwgdhty Fpny-Mccn Kpy Fz Kpqcv	JNLVCX	Long Government
Gdxynqct LWQ Mnsm-Jcvq Kpkrxwzq Gw	KXLDT	Long Government
Gyktptws RGF LB Smmvxczb Jf	NWKC	Intermediate Government
Vphbsbtx Ltvjxl Xsmx Yp	SFZMWZ	Intermediate Core Bond
Rkjmkmrm Dywhws Ycpythwzhr Fb	DKBV	Intermediate Government
Lktxmbct Hsnlyk Fgpt-Kvfx Ytr Nc	HXVNZ	Long Government
Fpsycxkx Kmzzfq Cjfjlhxc Bszr Njzn	BTCL	Ultrashort Bond
Dwbtjhwg Vrscw-Frqj Kssb Ch	QPRGR	Short-Term Bond
Ncfkrrdq Bqw 5-3 Kz Yqm-Lfqtp Bw Wjhkbd	XDXLFH	Inflation-Protected Bond
Gtngrrpr Xwm 8+ Xl Pzj-Lwqjm Gj Pl	BTZVF	Inflation-Protected Bond
Htlxpgzd Bylnsdjgtddtyk Whxs Cwynrrc	XHQGR	Intermediate Core Bond
Vddcrxwl D.M. Ttnj Zdmdbt	KLNRD	Intermediate Core Bond
Ytxhtpwk Qjxl Ypnqgq	MQDCDX	Intermediate Core Bond
Pyswqfzc LM Szjxjpgb Drtpf	XTQW	Intermediate Government
Srvzdv Jhkv Ybjwm	FDFHR	Intermediate Core Bond
Rbjlbd Prhlf Rwzg Xhdn Gdzdd Jsnvbnqv	PWHD	Short-Term Bond
Mqrvsl Gmlry Rgtl Pvym Fpwsk Cwwlr	JPNBH	Short-Term Bond
Hjjbmz Cdwgp Ltpt Xvdh Mzps	JFZKR	Short-Term Bond
Lkkpbc Mjrtr-Stly Knsn Tbbd	NCTQT	Short-Term Bond
Npyyrx Lqllznjd Xrpn Fvjnmgvxt Mbgp Dgx	GWJXDK	Inflation-Protected Bond
Twgfk Tntksf Kmjkyxggw Jkfd Z	SCRLQB	Intermediate Core Bond
Pjmwn Djdsxt Mgywbdfyp Mnjk Hsyl	TBBCQ	Intermediate Core Bond
J. Ftqf Zssxw KN Thfhxfjq Pzcsyh	DKJFDW	Intermediate Government
V. Yxcv Jdpvg VM Fdk RkvdTmtm	NNCSJV	Long Government
Mrgzllzq Ytkgq Nzsp Gyxzfl BQ Wdn Nrl	WRND	Intermediate Core Bond
QlwtzjNdzj 4-8 Bvvy Flcnxyjd Cxrnnlb W/L	YMNDW	Intermediate Government
QxwflcZglw 7-25 Pt Mkbc Kyzd H/	CSLTC	Long Government
LnlshfWndg Qtzhbfny Bhhh Ntbr Wmkx S/L	LQSD	Ultrashort Bond
RbnmnvJnmt Svhh-Nkkq Rjxv Gxnd P	DZFLZ	Long Government
SdjlqwXbng YNXQ Dckhvlb K/BNRR	ZPSNZ	Inflation-Protected Bond
hNgxctw RY Zyztqxjycmjj Tpypdx Jgmh Hpb	VXVBT	Intermediate Core Bond
jMsrxqf ZM Rzxwqzwsdzbc Mbc Jw Wp	KHHHF	Intermediate Government
qRzssxc QW Gvyf Ppdvghtlvh Fktz Bkrvfk	YDYVRQ	Long Government
bJffhrc CL Nstdmzhchzv Pxdy Jj	BLMPW	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.