If you've ever invested in a total bond market index fund, you've invested in a mutual fund or exchange-traded fund (ETF) that passively tracks the performance of the Bloomberg Barclays US Aggregate Bond Index. Learn more about this broad-based bond index and the funds that invest in it to see whether these funds are right for you.
- The Bloomberg Barclays US Aggregate Bond Index covers taxable corporate bonds, Treasury bonds, asset-backed securities, and municipal bonds.
- The Vanguard Total Bond Market Index Fund (VBMFX) is a large mutual fund that tracks the Bloomberg Barclays US Aggregate Bond Index.
- Aggregate bonds provide simplicity in investing, as well as broad diversification and low expenses.
- The Bloomberg Barclays US Aggregate Bond Index isn’t an investment in itself, but you can invest in bond index mutual funds and ETFs that track it.
Bloomberg Barclays US Aggregate Bond Index Definition
The Bloomberg Barclays US Aggregate Bond Index is a broad benchmark index for the U.S. bond market. The index covers all major types of bonds, including taxable corporate bonds, Treasury bonds, and municipal bonds.
Because of its wide range of bond market coverage, bond funds that track this index are often called "total bond index funds."
How to Invest in the Aggregate Bond Index
Investors can capture the performance of the overall bond market by investing in a mutual fund or an exchange-traded fund (ETF) that seeks to replicate the performance of the index. The broad-based bond benchmark index was formerly known as the Barclays Capital Aggregate Bond Index, or BarCap Aggregate, and before that it was known as the Lehman Brothers Aggregate Bond Index.
The largest mutual fund that tracks the Bloomberg Barclays US Aggregate Bond Index is Vanguard Total Bond Market Index Fund (VBMFX). It is only available to new investors in the form of Admiral Shares, trading as VBTLX. ETFs that track the index include the Schwab U.S. Aggregate Bond Index (SCHZ), the Vanguard Total Bond Market ETF (BND), and the iShares Core U.S. Aggregate Bond Index (AGG), which is the largest ETF of its kind.
Benefits of Investing in Aggregate Bond Index Funds
There are several benefits of investing in an aggregate bond index fund, including broad diversification, simplicity, passive management, low expenses, and long-term performance.
Here are details on the benefits of aggregate bond index funds, also known as total bond market index funds:
- Broad Diversification: One key advantage of using mutual funds or ETFs that track the Bloomberg Barclays US Aggregate Bond Index is gaining the ability to invest in several different bond types, such as corporate bonds, municipal bonds, and US Treasuries with a range of different maturities and duration. These can include short-term, intermediate-term, and long-term bonds, all in one fund.
- Simplicity: The bond market can be even more complex and difficult to predict than the stock market, so bond index funds can be smart holdings for investors who want to passively invest in the U.S. bond market without doing extensive research. A total bond index can also be used as a core holding in a diversified portfolio of investments.
- Passive Management: Since index funds are passively managed, there is no risk that the fund manager(s) will make errors in judgment, such as poor timing or emotion-based trades, that can potentially hurt performance.
- Low Expenses: Because passively managed funds require less cost to manage, expenses can be kept low, which can lead to performance advantages over time.
- Performance: Like S&P 500 Index funds or Total Stock Market Index Funds, the index funds that track the Barclays US Aggregate Bond Index serve the purpose and philosophy, "If you can't beat them, join them."
Over time, especially for periods of 10 or more years, the low costs of index funds help them to outperform most actively managed mutual funds.
The Bottom Line
The Bloomberg Barclays US Aggregate Index is not an investment, but there are investment securities, such as bond index mutual funds and ETFs, that track the index, enabling investors to capture the entire U.S. bond market in one fund. While index funds can be smart investments for almost any type of investor, they might not be right for everyone.
As is the case with any other mutual fund or ETF purchasing decision, investors should be sure that a fund tracking the Bloomberg Barclays US Aggregate Bond Index meets their investment objectives and is suitable for their tolerance for risk. It's also wise to be sure the fund complements other holdings in a portfolio.
The Balance does not provide tax, investment, or financial services or advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.