The best bond funds do a lot of heavy lifting for everyday investors.
Bonds are portfolio staples that help investors achieve any number of goals—they provide a differentiated source of returns, deliver dependable income to retirees, and offer a measure of safety when the stock market isn’t cooperating.
Bond funds make it much easier to own bonds. They’re a source of instant diversification, holding hundreds if not thousands of bonds that you can purchase with a single click in your brokerage or retirement account. They give bond exposure to investors whose brokers don’t allow them to purchase individual debt issues. And they let managers or a rules-based index do the work for you, saving you from countless hours of research that you might not have the time or appropriate skills to conduct.
And the best bond funds? Well, exactly what one prizes in their fund holdings will vary from person to person. But generally speaking, these products will deliver superior strategies at a lower cost than their peers, and allow individual investors to buy in for a reasonable amount of money.
Let me introduce you to some of the best bond funds you can buy. Each of these funds captures a different slice of the bond market, so while you might not have a need for every product listed, there’s almost certain to be at least one fund that addresses your particular goals.
Disclaimer: This article does not constitute individualized investment advice. These securities appear for your consideration and not as personalized investment recommendations. Act at your own discretion.
Why Invest in Bonds?
When you invest in bonds, you’re investing in debt issued by some sort of entity—from a national government to a local municipality, to corporations big and small—that they use to finance projects, equipment, and more. When you hold a bond, that entity is promising to eventually pay back your initial investment with interest, with that interest usually paid out every six months.
Bonds tend to trade in a range around their “par value,” which is how much their issuer has promised to pay back. (Basically, the initial price of the investment.) So while people generally invest in stocks for growth, they tend to invest in bonds for their income and relative stability.
“For investors with shorter time horizons (two years or less), bonds are typically a good place to invest to earn a conservative yield and protect principal,” says Paul Camhi, Vice President at investment firm The Wealth Alliance. “For instance, if you are saving money to buy your first home, keeping your money invested in short-term, high-quality bonds is a safe way to earn income on your cash.”
Also, investors typically want to invest more in bonds the closer they are to retirement, as their focus shifts from growing their wealth to protecting it.
“If you expect to retire in 30 years or more, you might target as little as 10% in bonds,” Camhi says. “When you are 20 years out, you might increase that to 20%. At 10 years away from retirement, the allocation to bonds might be closer to 30%.”
And in a few cases, certain types of bonds offer tax advantages. Interest on municipal bonds, for instance, isn’t subject to federal taxes, and in some cases, it’s even exempt from state and local taxes. And U.S. Treasury income, while taxable at the federal level, gets a pass from state and local levies.
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How Did We Choose These Bond Funds?
Bond funds are a mind-blowingly big business, at more than $5 trillion in assets under management, according to the Investment Company Institute (ICI).
That money is spread across nearly 2,000 mutual funds, many of which have a variety of share classes with different expenses, sales charges, and investment minimums, so … suffice to say that if you had to start your search with a universe of “all bond funds,” you’d suffer analysis paralysis pretty quickly.
This list is meant to take some of the bricks off your shoulders.
I’ve narrowed that universe down to a handful of the best bond mutual funds by filtering for a number of qualities that should benefit the average investor. Specifically, all of the funds on this list meet the following criteria:
- Morningstar Gold Medalist rating: Morningstar has two ratings systems—the Star ratings and the Medalist ratings. The latter are a forward-looking analytical view of a fund. Per Morningstar: “For actively managed funds, the top three ratings of Gold, Silver, and Bronze all indicate that our analysts expect the rated investment vehicle to produce positive alpha relative to its Morningstar Category index over the long term, meaning a period of at least five years. For passive strategies, the same ratings indicate that we expect the fund to deliver alpha relative to its Morningstar Category index that is above the lesser of the category median or zero over the long term.”
- No loads/sales charges: In addition to annual expenses, some funds charge additional fees, including “loads.” For instance, if you invested $10,000 in a mutual fund with a 5% front-end load, the mutual fund provider would immediately take $500 out in fees. So, you’d already be starting behind the 8-ball, investing just $9,500 to start with. The funds here have no sales charges.
- Low fees: The fund must have an annual expense ratio considered “Low” by Morningstar, which means its fees are in the bottom quintile (the lowest 20%) of funds within its category.
- Reasonable investment minimums: The maximum investment minimum for inclusion is $5,000. But only one fund on this list requires that much to start. Most require between $1,000 and $2,500, and a few funds have zero investment minimums. Also, some fund providers explicitly lay out lower investment minimums for specific accounts, such as individual retirement accounts (IRAs). T. Rowe Price, for instance, has $2,500 minimum initial investments on many of its funds, but lowers that minimum to $1,000 when investing through an IRA.
- Broad availability: Many mutual funds have several share classes, many of which are limited to certain types of accounts, like, say, only for 401(k)s or only for wealth management clients. All funds here are Investor-class or other shares that are generally considered to be widely available to retail investors.
From the much more manageable resulting list, I’ve selected a group of bond mutual funds that cover most of the core fixed-income strategies that investors commonly seek out. This should ensure that there’s at least one bond fund, if not many, for just about anyone reading this.
Editor’s note: Mutual funds selected for 2025 all had Gold Medalist ratings as of this writing. Funds will remain on the list throughout 2025 as long as they maintain a Medalist rating of at least Silver. Funds that fall below that threshold will be replaced.
The Best Bond Funds You Can Buy
I have a few final considerations for you to keep in mind as you read this list.
All of these funds have no loads, but brokerage commission fees might apply; check your brokerage before purchasing.
Your brokerage might require a larger minimum initial investment for mutual funds than the fund itself requires. And some brokerage accounts might not let you purchase certain funds, even if they’re generally available to retail investors. (For instance, you might be able to buy the completely made-up Woodley Investments Corporate Bond Fund at Schwab, but not at Fidelity.)
Lastly, this isn’t a ranking of the best bond funds. Every fund on here rates as excellent already. Instead, I’ve ordered this list by starting with the most broad-based bond categories, then making my way into more specific strategies.
With all that out of the way, let’s look at the best bond funds you can buy.
1. Fidelity U.S. Bond Index Fund
- Style: Intermediate-term core bond
- Assets under management: $62.2 billion*
- SEC yield: 4.3%**
- Expense ratio: 0.025%, or 25¢ per year for every $1,000 invested
- Minimum initial investment: None
One of the core bond strategies you’ll come across is … well, “core bond.” Core bond funds will be invested mostly in investment-grade U.S. bonds—typically, Treasuries, corporates, and securitized debt, such as mortgage-backed securities (MBSes). However, they’re allowed to have a little (read: up to 5%) exposure in below-investment-grade bonds, aka junk.
The Fidelity U.S. Bond Index Fund (FXNAX) is an intermediate-term core bond fund, which in Morningstar parlance means one of two things:
- Portfolio duration is 3.5 to six years. Duration is a measure of interest-rate sensitivity. A duration of 3.5 years implies that for every 1-percentage-point rise in interest rates, the fund would experience a short-term decline of 3.5%, and vice versa. The actual calculation is more complex; this is just a simplification that helps investors understand the greater the duration, the greater the risk.
- Average effective maturity of the portfolio is four to 10 years. Morningstar only uses this if duration is not available.
In return for this medium interest-rate risk, intermediate-term bond portfolios tend to deliver middle-of-the-road yields.
FXNAX tries to replicate the Bloomberg U.S. Aggregate Bond Index, aka “the Agg.” This is arguably the king of bond indexes; hundreds of billions of dollars are invested in funds that track this benchmark.
The resulting portfolio is exactly what you’d expect out of a core bond fund: Heavy exposure to U.S. Treasuries (45%), corporate bonds (25%), and MBSes (25%), with sprinklings of other debt, including U.S. agency debt, commercial MBSes (CMBSes), and asset-backed securities (ABSes). Duration is at the long end of the intermediate-term spectrum, at 5.9 years (so for every 1-point hike in rates, FXNAX would be expected to decline 5.9%, and vice versa), and often hovers around the six-year mark.
Why is Fidelity U.S. Bond Index among the market’s best bond funds? In addition to tracking a generally well-regarded bond index, FXNAX charges a paper-thin 0.025% in annual expenses and has no minimum initial investment. In other words: It’s one of the most accessible core bond funds you’ll find.
* Assets under management for all funds on this list reflect all share classes.
** SEC yield reflects the interest earned across the most recent 30-day period. This is a standard measure for funds holding bonds and preferred stocks.
Want to learn more about FXNAX? Check out the Fidelity provider site.
Related: 7 Best Fidelity Retirement Funds [Low-Cost + Long-Term]
2. Bridge Builder Core Plus Bond Fund
- Style: Intermediate-term core-plus bond
- Assets under management: $39.3 billion
- SEC yield: 5.1%
- Expense ratio: 0.23%*, or $2.30 per year for every $1,000 invested
- Minimum initial investment: None
Another broad-based strategy is “core-plus bond,” which as the term would imply, is “core bond” with some funk rubbed all over it. Core-plus bond funds will still be focused on investment-grade U.S. debt, but they’ll have more leeway to hold corporate junk, as well as emerging-markets debt, bank loans, debt denominated in foreign currencies, and a host of other bonds.
Bridge Builder might not have the same name cachet as other fund providers on this list, such as Vanguard and Fidelity—indeed, roughly $180 billion in AUM across its dozen or so mutual funds is a pittance compared to those names. But it has a gem in Bridge Builder Core Plus Bond Fund (BBCPX), which is the only intermediate-term core-plus bond fund to meet my criteria.
As of the most recent read, BBCPX’s largest allocation was to MBSes (40%), followed by big chunks of government-related bonds (23%), corporate issues (21%), and ABSes (12%). It also owned slivers of bank loans, U.K. government bonds, convertible securities, and more. And despite having the flexibility of investing more in junk than a regular core bond strategy, less than 5% of BBCPX’s portfolio was rated below investment-grade.
The fund isn’t quite 10 years old, so performance metrics are limited to nearer-term time periods. But so far, so good, with the fund topping both its benchmark and category average over the trailing three and five years.
Despite employing numerous managers across four different sub-advisers—BlackRock, Pimco, Metropolitan West and Loomis, Sayles—it’s able to offer an extremely low 0.23% expense ratio. While that fee is lower because of a waiver that’s set to expire in October, waivers are often extended, so it’s very possible that the low fee will last longer than just a few quarters. Better still? BBCPX has no investment minimum.
* 0.46% gross expense ratio is reduced with a 23-basis-point fee waiver through at least Oct. 28, 2025.
Want to learn more about BBCPX? Check out the Bridge Builder provider site.
Related: The 13 Best Mutual Funds You Can Buy
3. Fidelity Short-Term Treasury Bond Index Fund
- Style: Short-term government bond
- Assets under management: $3.1 billion
- SEC yield: 3.8%
- Expense ratio: 0.03%, or 30¢ per year for every $1,000 invested
- Minimum initial investment: None
What if you, as an investor, want to prioritize safety over yield?
Well, one way to ratchet down your risk is to invest in extremely high-quality bonds. In general, the higher an issuer’s credit quality, the higher the implied likelihood that an investor will get their full interest and principal … and as a result, the less yield an issuer must offer to draw interest in their bonds. And not much beats U.S. Treasuries, which are among the best-rated bonds on the planet.
Another way to lower risk is to own bonds with shorter maturities. Let’s say you’re choosing between two bonds from the same issuer: Bond A, which matures in two years, and Bond B, which matures in 20 years. Everything else being equal, you’d probably feel safer with Bond A, given that a lot could happen in the additional 18 years Bond B needs to mature!
Interest rates matter, too. When rates go higher, new bonds pay more, which tempt people to sell their old bonds for the new, higher-paying bonds. But the temptation is much greater when you’re dealing with longer-term bonds with lots of payments remaining—and not so great for short-term bonds with one or just a couple payments left.
In short: The longer the maturity, the more risk a bond buyer assumes. That’s why longer-term bonds tend to offer higher yields than shorter-term bonds.
The Fidelity Short-Term Treasury Bond Index Fund (FUMBX), then, is a perfect product for investors who want to earn some money on their investment but don’t want to take on a lot of risk. FUMBX holds a tight grouping of about 100 Treasury bond issues whose maturities span a few months to five years. That’s a bit longer-term than some other Treasury funds that limit their maturities to three years. But it still results in a portfolio average maturity of under three years, which is plenty short. Duration, meanwhile, is a scant 2.5 years, which means FUMBX would fall just 2.5% in response to a 1-percentage-point hike in interest rates. Conversely, it would only rise that much on a similar decline in rates.
Still, right now, this relatively safe portfolio yields nearly 4%, and that income is exempt from state and local taxes. So if you want portfolio protection that can still generate some income, FUMBX is one of the best bond funds you can buy.
Want to learn more about FUMBX? Check out the Fidelity provider site.
Related: 7 Best Fidelity ETFs for 2025 [Invest Tactically]
4. Vanguard Intermediate-Term Corporate Bond Index Fund Admiral Shares
- Style: Corporate bond
- Assets under management: $53.5 billion
- SEC yield: 5.2%
- Expense ratio: 0.06% or 60¢ per year for every $1,000 invested
- Minimum initial investment: $3,000
A little further up the risk/reward scale are intermediate-term corporate bonds.
A quick tip on bond-fund terminology. Unless you see words like “high yield” or “junk” attached to the type of debt, it’s a good assumption that the fund focuses only on investment-grade bonds in that class, not below-investment-grade. Example: It would be fair to assume that the completely fictional Woodley Wealth Corporate Bond Fund (WWCBX) primarily holds investment-grade corporates, and that the equally fictional Woodley Wealth Junk Debt Fund (WWJDX) invests primarily in below-investment-grade bonds.
But you’ll always want to look under the hood, just to be sure.
Anyways, investment-grade corporates are typically lower-rated than Treasuries or other federal agency debt, so you’re taking on a little more risk, but you typically get more yield as a result of that risk. Similarly, stepping up from short-term bonds to intermediate-term bonds means you’re taking on more rate and default risk, but again, you’re usually compensated more in exchange.
Put them together, and what do you get?
The Vanguard Intermediate-Term Corporate Bond Index Fund Admiral Shares (VICSX) is one of the best ways to invest in this kind of debt. VICSX holds more than 2,200 investment-grade corporate bonds with maturities of between five and 10 years. You’ll see debt from all sorts of recognizable names in here, including the likes of T-Mobile (TMUS), Bank of America (BAC), and Pfizer (PFE).
VICSX’s portfolio is split roughly 50/50 between BBB-rated bonds (the lowest investment-grade rating) and A-rated or above. Meanwhile, the focus on intermediates provides a fair blend of risk and income. Duration (a measure of interest-rate risk) is six years, which implies that a 1-percentage-point increase in interest rates would lead to a 6% short-term decline in the fund, and vice versa. Meanwhile, you’re getting more than 5% in yield on what is a pretty high-quality portfolio.
You can also get VICSX in ETF form: the Vanguard Intermediate-Term Corporate Bond ETF (VCIT), which charges 0.03% annually.
Want to learn more about VICSX? Check out the Vanguard provider site.
Related: 10 Monthly Dividend Stocks for Frequent, Regular Income
5. GMO High Yield I Shares
- Style: High-yield bond
- Assets under management: $133.4 million
- Trailing 12-month yield: 14.2%*
- Expense ratio: 0.45%**, or $4.50 per year for every $1,000 invested
- Minimum initial investment: None
If you’re willing to take on quite a bit more risk in your bond portfolio, you can usually collect pretty high levels of income in exchange for your tolerance.
“Below-investment-grade,” for what it’s worth, doesn’t mean the bonds are nuclear. It’s simply a bond ratings agency’s way of saying that a particular bond carries a higher risk of default—and you’ll usually be compensated with a generous yield. Also, like with investment-grade debt, “junk” is made up of numerous ratings, not just one. Low-rated investment-grade debt can be a small step removed from highly rated junk debt!
GMO High Yield I Shares (GMOZX), helmed by Joe Auth and Rachna Ramachandran, invests almost exclusively in corporate debt—currently 85% industrials, 10% financial institutions, and 4% in utilities. What little is left over is invested in agency debt. The lion’s share of its debt is rated either BB (the highest junk rating, at 54% of assets) or B (33%). Effective maturity is quite short, though, at just four years, helping GMOZX maintain a pretty low duration of 2.9 years.
An odd feature of this fund? Unlike many bond funds that pay out monthly, GMOZX only pays out semiannually. An SEC yield, then, is difficult to lock down. However, on a trailing 12-month basis, which factors in any payments made over the past year (in this case, two, as it pays semiannually), the fund has yielded a massive 14.3%. Unfortunately, that’s not as helpful as SEC yield for understanding how much yield you can expect in the near future.
Also, GMO High Yield’s I shares, which have no investment minimum, are relatively new, having come to life in 2023. Thus, to evaluate performance, Morningstar looks at “extended performance,” which is based on the performance of the investment’s oldest share class, adjusted for fees. But good news on that front—that performance has been good over the trailing five years, beating the category, and it has been downright dominant in the trailing three years, putting it ahead of 98% of its peers.
Morningstar’s Gold rating on GMOZX is in part due to a massive recent fee cut, with a waiver slashing net expenses by well more than half.
* Trailing 12-month yield.
** 1.07% gross expense ratio is reduced with a 62-basis-point fee waiver through at least June 30, 2025.
Want to learn more about GMOZX? Check out the GMO provider site.
Do you want to get serious about saving and planning for retirement? Sign up for Retire With Riley, Young and the Invested’s free retirement planning newsletter.
6. Vanguard Massachusetts Tax-Exempt Fund
- Style: Municipal bond
- Assets under management: $2.9 billion
- SEC yield: 4.2%
- Expense ratio: 0.09%, or 90¢ per year for every $1,000 invested
- Minimum initial investment: $3,000
Municipal bonds are typically issued by states, counties, cities, and other sub-federal government agencies. They’re sometimes used to fund general obligations and are backed by the municipality, though some are backed by the revenue a project would generate—say, a toll road. Muni bonds’ quality usually isn’t as high as similar federal debt but higher than comparable corporates.
But the glitziest trait of “munibonds” is their tax treatment. Municipal bonds’ interest is exempt from federal income taxes and net investment income tax (NIIT) … and if you live in the municipality in which it was issued, state and possibly even local income taxes. So whatever headline yield you see on a municipal bond, you’re probably earning much more once you factor in taxes.
Example: You live in Maryland and make $275,000 per year. That puts you in the 35% federal tax bracket and the 5.75% Maryland state tax bracket, plus it requires you to pay an additional 3.8% in NIIT, for a total tax rate of 44.55%. You buy a Maryland municipal bond with a 3% yield, so your income isn’t subject to any of those taxes. Your “tax-equivalent yield” would be 5.4%. That means if you wanted to buy a normal taxable bond and get the same amount of post-tax yield as the muni, that bond would have to yield 5.4%!
A single muni-bond fund met my criteria: the Vanguard Massachusetts Tax-Exempt Fund (VMATX). This fund, which yields more than 4% right now, holds nearly 900 Massachusetts munibonds, and it does so for a song—just 9 basis points annually. (A basis point is one one-hundredth of a percentage point.)
You do not have to live in Massachusetts to invest in this fund. If you’re a resident of another state, you could still buy VMATX and enjoy interest income free of federal taxes and NIITs, which would be up to 40.8% if you’re in the highest tax bracket. But obviously, Massachusetts residents get the maximum benefit from this fund, as they also get to back out their 5% state income tax.
Want to learn more about VMATX? Check out the Vanguard provider site.
Related: The 7 Best Gold ETFs You Can Buy
7. Vanguard Emerging Markets Government Bond Index Fund Admiral Shares
- Style: Emerging markets bond
- Assets under management: $5.5 billion
- SEC yield: 6.5%
- Expense ratio: 0.20%, or $2.00 per year for every $1,000 invested
- Minimum initial investment: $3,000
Every bond fund up until now has been focused on U.S. markets. But you absolutely can (and some advisors would say you should) have a little exposure to international bonds.
Vanguard Emerging Markets Government Bond Index Fund Admiral Shares (VGAVX), for instance, allows you to invest in the sovereign debt of emerging markets. There is no hard definition for an “emerging market” (EM), but it’s generally considered to be a nation with a faster-growing economy and a developing middle class that may also entail some risks, such as less regulated markets and political instability, compared to “developed markets.”
A little context to give you a mental picture: the U.S., western Europe, Japan, and Australia are among developed markets. India, Brazil, and Poland are among emerging markets.
Emerging markets bonds typically entail more risk, which is often rewarded with higher yields. They provide a source of diversification, which can be helpful when U.S. bonds aren’t as productive. And they provide some exposure to the growth of these developing nations.
Vanguard’s EM government bond fund invests in nearly 800 sovereign debt issues in more than 60 nations, with Saudi Arabia, Mexico, and Turkey among the highest-represented countries at the moment. Credit quality isn’t spectacular, but it’s not the nightmare fuel you might be fearing. A little more than half the portfolio is investment-grade, while another quarter is BB junk debt. Only about 20% of assets are invested in bonds rated B or worse.
In return, you currently earn more than 6% in yield, and you’re paying all of 20 basis points annually to get it. That easily puts VGAVX among some of the best bond funds you can buy.
Want to learn more about VGAVX? Check out the Vanguard provider site.
Related: How to Get Free Stocks for Signing Up: 10 Apps w/Free Shares
8. T. Rowe Price Dynamic Credit Fund
- Style: Nontraditional bond
- Assets under management: $1.1 billion
- SEC yield: 7.4%
- Expense ratio: 0.63%*, or $6.30 per year for every $1,000 invested
- Minimum initial investment: $2,500
Many bond products must stay within certain parameters—they can only hold these kinds of bonds, they have to have this percentage of investment-grade bonds, maturities must be at least this long. But nontraditional bond funds’ restraints are typically few and far between, with managers given not just a long leash on the types of bonds they can carry, but sometimes also permission to use derivatives.
Or as Morningstar beautifully puts it, “nontraditional bond funds are like the grade-school kids that liked to color outside the lines.”
But freedom doesn’t necessarily mean every nontraditional bond fund will be full of exotic holdings. T. Rowe Price Dynamic Credit Fund (RPIDX), for instance, is currently about 45% invested in corporate bonds, with high-teens exposure to collateralized debt and government obligations. It has a little bit of corporate junk, too, and a fairly high (13%) amount of cash reserves. This is also very much a “global” fund, as about a third of the portfolio is ex-U.S. in nature. Nothing too out of the ordinary.
That said, managers Kenneth Orchard and Steeve Boothe have a fairly aggressive portfolio right now. The majority of holdings (60%) are junk-rated, and about half of that is B or worse. Another 20% is investment-grade. The remainder (that isn’t cash reserves) is “not rated,” which simply means they’re not rated by Moody’s or Standard & Poor’s—it doesn’t imply anything about quality one way or another. Investors with the stomach for it are earning more than 7% for their trouble, though.
RPIDX hit the markets in January 2019, so it’s not a terribly old fund. But so far, so good. It has beaten the category and Morningstar’s performance benchmark index over every meaningful time period, and it has been within the top 15% of nontraditional bond funds over the trailing-five-year period.
* 0.84% gross expense ratio is reduced with a 21-basis-point fee waiver through at least Feb. 28, 2027.
Want to learn more about RPIDX? Check out the T. Rowe Price provider site.
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