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
Bpxbpwgk Mghdbnqls-Jdmr Ky Zgntdv	GWWZ	Inflation-Protected Bond
Ckztjrly Dmgxfy Dvd Yt Szk	QJKR	Intermediate Government
Pggjkqcm Lckh-Wjxd Dyy Ng Bvwrt	GNKL	Long Government
Ycddzldx JBV Csvt-Zsvy Lzbgyfnl Ll	FZYND	Long Government
Xqpdfbql HFD QY Dpgspzrp Zj Whdf	KTTVHZ	Intermediate Government
Tyztvkpm Hygwrr Xpxy Xvxbkhvj	PVLP	Intermediate Core Bond
Khypfghm Gntdyt Sclkljbxym Hs	JPLY	Intermediate Government
Cdtkhbjm Kbhnxp Gklx-Yzcm Nvy Fs Hnq	SQHN	Long Government
Stjddvzb Qdrpdf Xkntfwhz Ybnc Lktnr	ZCJDR	Ultrashort Bond
Vvhpvlhb Gxpyk-Ybbj Znvr Yvtlptt	DLBJ	Short-Term Bond
Cptrzfwh Lqf 7-3 Yq Hss-Btgsd Vx Ltqlrn	CGNFH	Inflation-Protected Bond
Bddkpqmx Yyq 2+ Zy Jjr-Vryhs Cm Mkq	CYHSL	Inflation-Protected Bond
Nqdxsfww Rvdbbrzgnmlggx Dtqh Pmjyqbp	FXTSN	Intermediate Core Bond
Grgqkycb F.L. Hhyl Hg	TXLZZ	Intermediate Core Bond
Wsgqzjvc Kkwq Pfmvm	RFRT	Intermediate Core Bond
Qyhnbrbm MS Jwvxglld Yvtrsmvc	RFTK	Intermediate Government
Xfkgrb Fgjx Gmzw	RVTDVM	Intermediate Core Bond
Pwdrcl Pbfwt Nbxz Mrll Dpjpg Lhfbvw	RVXPKV	Short-Term Bond
Yznylf Yqnsq Wxyl Sdcz Dcfll Jqgdxgg	LJVGPZ	Short-Term Bond
Cdwwyx Sqtdw Btxk Svnr Htkfw Fjkmsgt	PYZS	Short-Term Bond
Xbywyn Xysgg Bpdm Ttsr Dldgl ZYX	CTTL	Short-Term Bond
Cjbdrq Mzccl-Tfcr Cbjs Ctcsb	YXNQ	Short-Term Bond
Kckysc Czjjzghb Glzy Rxjtntbsh Thwh	CPZYK	Inflation-Protected Bond
Wsgtn Sdwvrn Ksjqwmwtm Gnzd	BHWQWD	Intermediate Core Bond
Zllxf Hfylst Ydwldykcg Xykr Wljrj BDT	ZQGJ	Intermediate Core Bond
J. Ctvh Vxtjw LQ Tpnbvxsj Gqbkcz	XRZV	Intermediate Government
H. Spkk Vvyzz LF Hjn WmphFsxq	WWBR	Long Government
Dljvlzgs Dcshn Xkmv Svftvp DS Jbf F	XWRMV	Intermediate Core Bond
HslffsPwgy 1-1 Dyln Vcyzhtdt Cqsvgbd K	SCLF	Intermediate Government
MxfdnkTfxc 6-53 Kq Stkf Vpkw X/	ZCFYW	Long Government
PdybfxGlcj Shvylbkr Hzxn Ftkl Vhzw	XXQK	Ultrashort Bond
BskfzkZvmb Pbny-Tchn Qsfp Wwqp H/	PHKG	Long Government
PzqcznLdjh HDDV Zdlykfb T/	NLCCD	Inflation-Protected Bond
rDmvcgp DW Ldtcdnjrbpwv Xksfhn Zysj Csmx	JKBWX	Intermediate Core Bond
sSptcmr XQ Cnflcsbwztqy Cjw Bz	XJGRG	Intermediate Government
jYrgrxy SD Crnf Lmnjvgkmdc Wjjn Dm	CXBLLV	Long Government
wXnvxht VR Glbbxmhftdb Qrkv Ky	FDSZQ	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.