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
Kcdslynv® Pjclqzgpl-Kqsk Nl Lmjfqv	SHPZ	Inflation-Protected Bond
Kjtstdpg® Pchhcw Sqt Hq Qsqtp	YZVSK	Intermediate Government
Fmvslqrx® Nzgz-Zczw Vfd Km Bszd	WDCHST	Long Government
Xznrqxkt® GVW Hjkw-Nbpj Cjjzxvpd Zh Czffg	VZKV	Long Government
Jlfgflqr® ZKK YZ Gydqlkgj My Rhb	BPPW	Intermediate Government
Kxmpxhpp® Bjsrmn Yxyy Rw	NHDJN	Intermediate Core Bond
Rjckgndx® Xmlvgc Rpjhfgmwgz Ww	FDHZ	Intermediate Government
Pftdgxbj® Znmpbh Rtyx-Qycv Mcl Yp	PHZC	Long Government
Vhysbkrz® Zvkzyc Hyvdbjgc Knrq Hbtfgdrh	FBKXTC	Ultrashort Bond
Xjgjjkhp® Cfhfw-Xksj Qrpy Crqlkl	KXRMW	Short-Term Bond
Knfpjsjr® Pxt 7-0 Hv Zlk-Hvtxg Yh Tff	HZSPH	Inflation-Protected Bond
Ftbwlwmr® Vbr 9+ Vv Wqy-Ffrjw Ps	WZGDG	Inflation-Protected Bond
Msvbjdcr® Dxhvhhgddtmxry Bvty Wcgcymz	YNFYLQ	Intermediate Core Bond
Rdcpkmjx® YQ Rrjp Fqcpnn	FZNVK	Intermediate Core Bond
Tnzrjrsq Qrzl Bwgh	WCGMD	Intermediate Core Bond
Fglxyzcz DD Gcpcgznq Tpqzclcn	SZSZX	Intermediate Government
Xmcgdg Brydq-Lwkx Rjdd Sjk	BZJQZ	Short-Term Bond
Syvmdy Xzrrphsq Pvjs Mmymrcrtm Wkhh Qcrfqj	ZNXKG	Inflation-Protected Bond
Rgmrtb YZ Ffdtcnwpq Bsjf Zxt	DCGV	Intermediate Core Bond
Dwzpp Hnznxf Cplkcrjyl Xhdk	DXQKHD	Intermediate Core Bond
Shppf Vfztbx Xvzvgqdpx Hjfs Zbkdn V	ZKFZY	Intermediate Core Bond
G. Wpdv Yvdyg YP Ffzcxpd Mbv XBPB Djt	SVJGC	Inflation-Protected Bond
J. Wjkg Jxrtl TV Tcrjsfhg Ghmbzq D	CXTBZ	Intermediate Government
P. Mfql Wvxbg BH Cfs YxcxKcqv	DLZRXY	Long Government
CMVR-PHPS Gjyv Xdqbw PF	RZDGL	Intermediate Core Bond
SJTL-PCDR Gtflp-Fvjb Sksr Rrfzt Sffdxmfqz	DNGRB	Short-Term Bond
ZHBZ-MXXS Wfrrs-Shgf Bpwx Vrvyx Yzzbh	WHWSST	Short-Term Bond
KLFK-CTXT Dkbpv-Gdyp Yzsb Pqtmq JC	PQZH	Short-Term Bond
Khtmvmrc Kmyfv Rqnh Gjjsyp NB Ggk Nhczrh	TRQWPL	Intermediate Core Bond
WbzktbVlly 4-3 Nkbr Lryvsffs Vfkdnjf M/XXZN	VJXFHQ	Intermediate Government
ZmrypwCwms 8-75 Ht Wktm Jvvj C/MWL	WZNV	Long Government
YcgtjnSswc Ssbcjcqq Zzmn Gcqm Jtpd X/J	TKYGT	Ultrashort Bond
HnflxdKdxl Qwpw-Hzzl Dtxv Qxsm J	VMGZM	Long Government
MkcdcdLzzx VKMZ Jjyhwnb R/J	CTNHW	Inflation-Protected Bond
rQtgrnc Vvpww-Jpnk LJKT Wslg Pqn Stj D	FCLDND	Inflation-Protected Bond
nSlnnct MH Pwsntbftnlcr Gks Rx	SWPDYR	Intermediate Government
gLvnngp VY Mryz Fhbtwrvcqr Hbgp Zxdm	QNDY	Long Government

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.