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Index your bonds

What is bond indexing?

Bond indexing, sometimes called passive bond investing, is a popular approach to building fixed income allocations. A bond index strategy is a portfolio of bonds that seeks to track the performance of a market index, such as the Bloomberg Barclays U.S. Aggregate Bond Index. In recent years, bond exchange traded funds (ETFs) have become a popular way to invest in bonds.

Why index your bonds?

Indexing can empower investors to build better bond portfolios, just as it has done in equities. Taking a closer look at the benefits reveals exactly why investors are turning to indexing to invest in bonds.
Customization
Fine-tune portfolios with broad or targeted bond exposures
Low cost
Lower portfolio expenses with low cost index investments
Diversification
Gain access to thousands of bonds in a single trade with index investments
Transparency
Know what you own with a rules-based bond index investment

Top 3 things you need to know

about bond indexing

Bond indexing performance

Performance

Various bond index strategies, like iShares bond ETFs, have outperformed their Morningstar mutual fund categories across a broad range of sectors.

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Bond indexing portfolio construction

Portfolio construction

The largest weights in fixed income indices tend to be large, blue chip companies similar to equity indices.

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Bond indexing portfolio construction
Bond indexing management process

Management process

Bond index funds and ETFs are managed by fixed income professionals who use human expertise and technology to intelligently pursue the fund’s objectives.

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