financialtreat – will explain about the Best Total Bond Market Index Funds Of 2022 that you will get in the following article. let’s look at this article carefully!
Total U.S. bond index funds typically track the Bloomberg Barclays U.S. Aggregate Bond Index. That’s true of most of the bond funds that made our list, including FXNAX. The index measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market.
Bonds in the index include Treasury and other government-related bonds and investment-grade corporate bonds. The fund does not require a minimum investment and charges a rock-bottom fee of just 2.5 basis points.
Best Total Bond Market Index Funds Of 2022
- Tracking Index: Bloomberg Barclays U.S. Aggregate Bond Index
- Minimum Investment: None
- Duration: 6.47 years
- Inception: 1990
- Holdings: 8,236
Vanguard Total Bond Market Index Fund (VBTLX)
In addition to its U.S. Aggregate Bond Index, Bloomberg publishes sub-indices that make important changes to its flagship index. These sub-indices include a float adjusted index, which Vanguard uses for its total bond index fund. Bloomberg added this sub-index in 2009 to respond to the Federal Reserve’s QE bond buying.
The float adjusted benchmark excludes securities held by the Fed. Because the Fed buys largely government bonds, this sub-index has a slightly lower allocation to government bonds and slightly higher allocation of corporate bonds than the flagship index.
The fund does require a minimum investment of $3,000, but charges a low fee of five basis points. Of note, the fund holds very little cash, suggesting that its portfolio more closely tracks the index.
- Tracking Index: Bloomberg Barclays U.S. Aggregate Float Adjusted Bond Index
- Minimum Investment: $3,000
- Duration: 6.8 years
- Inception: 2001
- Holdings: 18,064
Fidelity Total Bond Fund (FTBFX)
Bloomberg Barclays bond indices include the U.S. Universal Index, which this fund uses as a guide to its portfolio construction. The U.S. Universal Index adds high yield bonds and emerging markets debt. As such, it increases the credit risk (i.e., risk of default) of the bond portfolio, along with the expected return.
The result is a bond index fund with excellent long-term performance. It’s also the most expensive fund on our list, at 45 basis points. While the fund invests primarily in U.S. bonds, it also invests in debt issued by foreign entities. The fund held nearly 7% in cash as of September 2021.
- Tracking Index: Bloomberg Barclays U.S. Universal Bond Index
- Minimum Investment: None
- Duration: 6.12 years
- Inception: 2002
- Holdings: 6,047
chwab U.S. Aggregate Bond Index Fund (SWAGX)
The Schwab U.S. Aggregate Bond Index Fund tracks the Bloomberg Barclays U.S. Aggregate Index at a low, low cost of just four basis points. It requires no minimum investment and has a trailing twelve month yield of 1.94%. With an inception date of 2017, a five-year return is not presently available.
The fund aims to invest at least 90% of its net assets in securities included in its benchmark index, and the remaining 10% of assets in highly liquid securities not included in its index, including short-term government or agency debt, other funds and possibly futures contracts.
- Tracking Index: Bloomberg Barclays US Aggregate Bond Index
- Minimum Investment: None
- Duration: 6.6 years
- Inception: 2017
- Holdings: 8,080
BNY Mellon Bond Market Index Fund (DBIRX)
The BNY Mellon Bond Market Index Fund aims to match the total return of the Bloomberg Barclays U.S. Aggregate Index. It allocates at least 80% of its net assets in the holdings of the index, and invests approximately 20% of its assets in various short-term, fixed-income securities and money market funds to maintain liquidity.
The fund requires a $1,000 minimum investment and charges an expense ratio of 15 basis points. With $1.0 billion in total assets and 2,850 holdings, the fund presently holds a significant amount of cash, weighing in at over 10% as of September 2021, according to Morningstar.
- Tracking Index: Bloomberg Barclays U.S. Aggregate Bond Index
- Minimum Investment: $1,000
- Duration: 6.8 years
- Inception: 1993
- Holdings: 2,431
Northern Trust Bond Index (NOBOX)
The Northern Trust Bond Index Fund charges a fee of 15 basis points. It has a 5-year performance of 2.80% and a trailing 12-month yield of 2.09%. It’s the only fund in our list that holds no cash, according to Morningstar.
- Tracking Index: Bloomberg Barclays U.S. Aggregate Bond Index
- Minimum Investment: $2,500
- Expense Ratio: Investment 0.15%
- Duration: 6.67 years
- Inception: 2007
- Holdings: 3,336
T. Rowe Price QM U.S. Bond Index Fund (PBDIX)
The T. Rowe Price QM U.S. Bond Index Fund has one of the highest five-year return of the funds on our list that track the Bloomberg Barclays U.S. Aggregate Bond Index. The fund’s prospectus notes that “incremental returns above the index could result in a greater chance that the fund’s returns will deviate from the returns of its benchmark when compared with a fund that strictly follows a passive indexing strategy.” This in part explains both its slightly better performance and its higher expense ratio of 25 basis points.
- Tracking Index: Bloomberg Barclays U.S. Aggregate Bond Index
- Minimum Investment: $2,500
- Duration: 6.7 years
- Inception: 2000
- Holdings: 1,248
Methodology
Our methodology focused on over two dozen index funds that seek to track the broad U.S. bond market. We excluded from consideration funds that didn’t cover the entire market, such as speciality bond funds invested chiefly or exclusively in Treasury Inflation-Protected Securities (TIPS), high-yield corporate bonds or municipal bonds. We also excluded actively managed bond funds.
In evaluating broad market bond index funds, we considered several factors. Using data provided by Morningstar and fund management companies, we evaluated each candidate fund’s five-year returns, expense ratio and tracked index. Many broad market bond funds track the Bloomberg Barclays U.S. Aggregate Bond Index, and we felt it was important to include funds that track other indexes, so long as they met the criteria mentioned above.
The difference in these variations is particularly important with the Bloomberg Barclays U.S. Universal Bond Index. As highlighted above in the Fidelity Total Bond Fund, the fund’s five-year return is significantly higher than the other options in our list, in large part because it takes on more credit risk.
Finally, we considered each fund’s yield over the last 12 months, the so-called trailing 12-month yield, or TTM. A fund’s TTM yield gives investors a glimpse into the current bond market, something that a five- or ten-year return measure can obscure.
How Do Total Bond Market Index Funds Work?
On the surface, it can be hard to distinguish one total bond market index fund from another. For instance, most of the funds on our list track the Bloomberg Barclays US Aggregate Bond Index. That’s no accident, since it’s considered the main benchmark index for the U.S. bond market, covering all major types of fixed income.
On closer examination, important differences emerge. First and foremost are costs—choosing an index fund with the lowest possible fees ensures that more money stays in your pocket over the life of an investment. The funds we list here range in price from 2.5 basis points to 45 basis points.
Then there are total bond market funds that track other indexes, like the U.S. Universal Index. This alternative index adds high-yield and emerging markets bonds to the mix, offering higher returns in exchange for more cost and somewhat higher risk.
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Should You Invest in a Total Bond Market Index Fund?
Index fund investing benefits from lower fees than buying actively managed mutual funds. Lower costs result in better after-fee returns over the long term. That’s true with fixed income investments as well as equities.
SP Global tracks the relative performance of actively managed funds compared to their respective benchmark across a number of asset classes. its latest report shows that actively managed funds were more likely to underperform their respective index over one-, three- and five-year periods. Morningstar has reported similar results. Thus the article about the Best Total Bond Market Index Funds Of 2022. hopefully it will be useful for you and that’s all thanks.