Crystal Balll2

Editors' Index Fund Picks - Domestic Bond Funds

Crystal Balll2

Bond index funds can reduce risk in a portfolio. Indexing bonds also makes sense because of their lower yields compared to stocks. We like short-term bonds because of their low risk and lack of correlation with equity markets.

Top Short-Term Bond Funds - in no particular order
Fund name
Ticker
Expense ratio
Vanguard Short-Term Bond Index
0.21%
Schwab Short-Term Bond Market Index
0.35%
 
Top Intermediate-Term Bond Funds - in no particular order
Fund name
Ticker
Expense ratio
Vanguard Total Bond Index
0.22%
Vanguard Intm Bond Index
0.21%
Summit Lehman Bond Index Fund
0.60%
Schwab Total Bond Market Index
0.35%
E*TRADE Bond
0.65%
Dreyfus Bond Market Index Inv
0.40%

 

Top Long-Term Bond Funds - in no particular order
Fund name
Ticker
Expense ratio
Vanguard Long-Term Bond Index
0.21%
Eclipse Indexed Bond
0.50%

For each asset class there are several popular indexes to choose from. Our goal is to identify the funds that track those indexes efficiently and cheaply. None of the funds on our list charge front or deferred loads, or 12b-1 fees. We listed some funds with fairly high fees because investors who choose to work with broker or advisors understand this may be part of how they earn their fees. In the case of both ETFs and funds only available through advisors (such as the Dimensional Fund Advisor or DFA funds) there are additional transaction or holding costs.

Our list is by no means complete, but we think it's a good starting point. We're very interested in comments you might have. We're willing to consider even higher-cost funds for our list, but we need to be convinced. Please post comments to our bulletin boards.

For all lists, the funds are in no particular order and not listed by preference.

Of course, an asset allocation plan is more than just finding good building blocks. They must fit together. But we think this is a good start.