Short answer: A bond index fund holds the bonds in a bond index, such as the U.S. investment-grade bond market, and its price moves in the opposite direction to interest rates. In the SEC’s fund data (2025 Q3 to 2026 Q2), we counted 435 bond index funds holding about $2.8 trillion, with a median expense ratio of 0.12% in their cheapest share class; the largest total bond market funds charge 0.025% to 0.04%.
Most talk about index funds is about stocks: the S&P 500, the total stock market. But a large part of the index fund world holds bonds instead. Bond index funds are the quieter half of many portfolios, and they work differently from stock funds in ways that matter.
This guide explains what bond index funds hold, how they behave when interest rates change, and what they cost. For the numbers, we used the funds’ own filings with the U.S. Securities and Exchange Commission.
The short version: we found 435 bond index funds holding about $2.8 trillion. The median one charges 0.12% a year in its cheapest share class, far less than the typical stock index fund (our calculations from SEC Form N-CEN and prospectus fee data).
What a bond index fund is
A bond is a loan. When you buy one, you lend money to a government or a company, which pays you interest and returns the principal when the bond matures. FINRA describes the fund version simply: “A bond fund is a mutual fund or exchange-traded fund that invests in bonds” (FINRA).
A bond index fund holds the bonds in a bond index, such as the Bloomberg U.S. Aggregate Bond Index, the most widely followed benchmark for the U.S. bond market. According to the prospectus of one fund that tracks it, the index “includes investment-grade U.S. Treasury bonds, government-related bonds, corporate bonds, mortgage-backed pass-through securities (“MBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”)” (iShares).
Bond indexes are huge. A total bond market fund can hold well over ten thousand individual bonds. The iShares Core U.S. Aggregate Bond ETF, for example, listed 13,450 holdings as of September 28, 2026 (iShares).
Bond fund vs. individual bond
There’s one key difference between owning a bond and owning a bond fund. FINRA explains: “When you buy a bond, you’re promised a specific rate of interest and return of your principal. That’s not the case with a bond fund, which owns a number of bonds with different rates and maturities” (FINRA).
A total bond market fund never matures. As its bonds come due, it buys new ones to keep matching the index. So the fund’s price can go up and down indefinitely, while an individual bond held to maturity pays back its face value.
How rates move bond fund prices
Interest rates are the biggest force on a bond fund’s price. As FINRA puts it: “When interest rates rise, bond prices generally fall. When interest rates fall, bond prices generally rise.”
The reason: if new bonds pay 5% and your older bond pays 3%, nobody will pay full price for yours. Its price falls until its yield is competitive.
Duration: the number to check
How much a bond fund reacts to interest rates is measured by its duration, in years. FINRA’s rule of thumb: “For every 1 percentage-point change in interest rates, a bond will rise or fall in the opposite direction by an amount equal to its duration number” (FINRA).
A typical U.S. total bond market fund has a duration of about 5.7 to 5.8 years (iShares, Vanguard). That means that if interest rates rose by one percentage point, you’d expect its price to fall roughly 5.8%, all else being equal. A short-term bond fund might have a duration of two or three years; a long-term Treasury fund can be several times higher.
2022 showed what that means in practice. As interest rates rose sharply, the Bloomberg U.S. Aggregate Bond Index lost 13.01% for the calendar year, according to the calendar-year returns published for a fund that tracks it (iShares).
The other side: once rates are higher, a bond fund reinvests maturing bonds at those higher rates, so its income rises over time. Over a period roughly as long as its duration, higher income tends to make up for the initial price drop.
How many bond index funds there are
We started from the same census we used to count how many index funds there are in the U.S.: each fund’s most recent annual Form N-CEN filed with the SEC, using the fund’s own answer on whether it’s an index fund. We set aside money market funds and 314 leveraged or inverse funds, then identified bond funds by the words in their names. The categories are approximate.
| Bond index funds | All other index funds (mostly stock) | |
|---|---|---|
| Number of funds | 435 | 1,787 |
| Assets | about $2.8 trillion | about $13.4 trillion |
| Share of index fund assets | 17% | 83% |
| ETFs or funds with an ETF share class | 81% | 75% |
Vanguard is especially dominant in bond index funds: the funds it advises hold about 49% of all bond index fund assets. The five largest bond index funds alone hold about 38%.
The main types
Grouping bond index funds by their names:
| Type | Funds | Assets | Median expense ratio |
|---|---|---|---|
| Total market / aggregate | 42 | about $1.23 trillion | 0.07% |
| Treasury and government | 55 | about $380 billion | 0.09% |
| Target maturity | 134 | about $561 billion | 0.10% |
| Corporate | 44 | about $122 billion | 0.15% |
| Municipal | 30 | about $106 billion | 0.12% |
| TIPS (inflation-protected) | 23 | about $94 billion | 0.09% |
| High yield | 48 | about $81 billion | 0.35% |
| Mortgage-backed | 8 | about $72 billion | 0.04% |
| Other | 51 | about $145 billion | 0.20% |
Expense ratios are for each fund’s cheapest share class, from the prospectus fee data funds file with the SEC.
What each type is for:
- Total market / aggregate funds hold a broad mix of investment-grade U.S. bonds: Treasuries, agency mortgages and corporates. For many investors, this single fund is the entire bond allocation.
- Treasury funds hold U.S. government debt only, split by maturity: short, intermediate or long.
- Target-maturity funds, such as iShares iBonds and Invesco BulletShares, hold bonds that all mature in one specific year and then close. Invesco says each “is designed to terminate in December of the designated year and make a final distribution at maturity” (Invesco). They behave more like a basket of individual bonds.
- Municipal funds hold bonds issued by states and cities. According to Investor.gov, “Generally, the interest on municipal bonds is exempt from federal income tax” (Investor.gov). They mainly make sense in taxable accounts for investors in higher tax brackets.
- TIPS funds hold Treasury Inflation-Protected Securities. The U.S. Treasury explains that “the principal of a TIPS fluctuates with inflation and deflation,” with changes “tied to the Consumer Price Index” (U.S. Treasury).
- High-yield funds hold bonds from companies with lower credit ratings. They pay more interest, but behave more like stocks in a downturn, and cost noticeably more.
What bond index funds cost
Bond index funds are some of the cheapest funds available. Comparing each fund’s cheapest share class:
| Bond index funds | U.S. stock index funds | International stock index funds | |
|---|---|---|---|
| Median expense ratio | 0.12% | 0.35% | 0.45% |
| Asset-weighted average | 0.06% | 0.07% | 0.13% |
| Funds at 0.10% or less | 47% | 19% | 16% |
Excludes leveraged and inverse funds. Categories are based on fund names and are approximate.
Low costs matter even more for bonds than for stocks, because bond returns are usually lower. A 0.50% fee takes a much bigger bite out of a 4% yield than out of a 10% stock return. Our guide to expense ratios shows how to find and compare them.
Some of the largest total bond market funds
| Fund | Expense ratio | Effective duration | Holdings |
|---|---|---|---|
| Vanguard Total Bond Market ETF (BND) | 0.03% | 5.7 years | 11,434 |
| iShares Core U.S. Aggregate Bond ETF (AGG) | 0.03% | 5.71 years | 13,450 |
| Schwab U.S. Aggregate Bond ETF (SCHZ) | 0.03% | 5.8 years | 12,530 |
| Schwab U.S. Aggregate Bond Index Fund (SWAGX) | 0.04% | 5.8 years | 12,228 |
| Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) | 0.04% | same portfolio as BND | same portfolio as BND |
| Fidelity U.S. Bond Index Fund (FXNAX) | 0.025% | see fund page | see fund page |
From each fund’s latest prospectus, fact sheet or website, with data as of dates between June 30 and September 30, 2026. Figures change over time; check the fund’s own page.
For international bonds, the Vanguard Total International Bond ETF (BNDX) charges 0.07% and hedges its currency exposure, a feature that, according to its fact sheet, “seek[s] to mitigate uncertainty in exchange rates” (Vanguard).
Where bond index funds fit
Bonds play a different role from stocks in a portfolio:
- They usually fall less than stocks in a stock market crash, and high-quality government bonds have often risen when stocks fell sharply. 2022, when both fell together, was an exception driven by rapidly rising rates.
- They provide income, paid monthly by most bond funds.
- They reduce the swings of a portfolio, which helps many investors stay invested.
That’s why a bond fund is one of the three pieces of the classic three-fund portfolio. How much to hold in bonds depends mostly on your time horizon and how much volatility you can live with.
Because most bond fund income is taxed as ordinary income, many investors prefer to hold taxable bond funds in tax-advantaged accounts such as an IRA or 401(k). We cover that in our guide to Roth IRAs vs. taxable accounts.
Common questions
Can a bond index fund lose money? Yes. Bond fund prices fall when interest rates rise, and funds holding lower-quality bonds can also lose money when borrowers default. Investor.gov warns that “you can lose money in a bond fund, including those that invest only in insured bonds or U.S. government bonds” (Investor.gov).
Is a bond fund the same as a savings account? No. A savings account keeps a stable balance. A bond fund’s price moves every day, and it isn’t insured by the FDIC.
Short-term or total market? Short-term bond funds move less when rates change, but usually yield less over time. Total market funds sit in the middle. Long-term funds can swing almost as much as stocks.
Should I buy individual bonds instead? Individual bonds held to maturity return their face value if the issuer doesn’t default, but building a diversified bond portfolio yourself takes a lot of money and effort. A bond index fund gives you thousands of bonds in one purchase. Target-maturity funds offer a middle ground.
The bottom line
Bond index funds are the low-cost, steadier companion to stock index funds. A single total bond market fund, charging a few hundredths of a percent a year, can cover an entire bond allocation. Before choosing one, check two numbers: the expense ratio, and the duration, which tells you how much the fund is likely to move when interest rates change.
This article is general information based on public filings, not personal investment advice. See our Financial Disclaimer.
Sources and data notes
- SEC, Form N-CEN data sets, 2025 Q3 to 2026 Q2: index fund status, ETF status, adviser and average net assets. Each fund’s most recent report; money market, leveraged and inverse funds excluded. Bond funds and their types identified by fund name (our classification, approximate).
- SEC, Mutual fund prospectus risk/return summary data sets: expense ratios; the cheapest share class of each fund. Medians and averages are our own calculations. Our editorial methodology explains how we count.
- FINRA, Bonds, Mutual Funds and Brush Up on Bonds: Interest Rate Changes and Duration (September 19, 2024).
- Investor.gov, Municipal Bonds and Bond Funds and Income Funds.
- U.S. Treasury, Fiscal Data, TIPS and CPI data.
- Fund data: iShares AGG and its summary prospectus; Vanguard BND fact sheet, VBTLX fact sheet and BNDX fact sheet; Schwab SCHZ and SWAGX; Fidelity FXNAX summary prospectus; Invesco BulletShares.
Data as of the 2026 Q2 SEC data sets. Sources checked on September 30, 2026.