Best Bond Funds for Retirement Investors

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When it comes to saving for retirement, investors typically use a combination of stock and fixed income investments. If you’re young and still a long way from retirement, your portfolio is more likely to contain mostly equity (equity-based) investments, as you have plenty of time to compensate for short-term market fluctuations. And then, as you approach retirement, your portfolio allocation should begin to shift more towards investments deemed safer, such as bonds and other fixed-income securities.

Knowing which bond investments to choose can be somewhat confusing and difficult. Despite all the focus on equities, the bond market is actually bigger than the stock market. The value of the global bond market was about $123.5 trillion in 2020, compared to $105.8 trillion for the global stock market, according to the Securities Industry and Financial Markets Association.

The best bond funds for retirement portfolios

Here are some of the best bond funds to consider for your retirement portfolio.

*Note: Data as of June 6, 2022

iShares Core US Aggregate Bond ETF (AGG)

The iShares Core US Aggregate Bond ETF aims to provide broad exposure to the US investment grade bond market. Over 70% of the fund is invested in AAA rated securities.

Annualized return over 5 years: 0.84 percent

Yield: 2.92 percent

Spending rate: 0.04 percent

Fund assets: $82.2 billion

Vanguard Total Bond Market ETF (BND)

The Vanguard Total Bond Market ETF seeks to track the investment performance of a broad, market-weighted bond index. You will gain exposure to the investment-grade US taxable bond market with approximately two-thirds of the portfolio invested in US government bonds.

Annualized return over 5 years: 0.89 percent

Yield: 3.09 percent

Spending rate: 0.03 percent

Fund assets: $80.8 billion

Fidelity U.S. Bond Index Fund (FXNAX)

Fidelity US Bond Index Fund seeks to track the total return of debt securities of the Bloomberg Barclays US Aggregate Bond Index. Typically, the fund invests at least 80% of its assets in securities included in the index.

Annualized return over 5 years: 0.87 percent

Yield: 2.04 percent

Spending rate: 0.025 percent

Fund assets: $53.4 billion

Vanguard Short Term Corporate Bond ETF (VCSH)

The Vanguard Short-Term Corporate Bond ETF invests primarily in high-quality corporate bonds with the aim of providing current income with moderate volatility. The fund maintains a dollar-weighted average maturity of between one and five years.

Annualized return over 5 years: 1.52 percent

Yield: 3.56 percent

Spending rate: 0.04 percent

Fund assets: $40.9 billion

iShares Floating Rate Bond ETF (FLOT)

The iShares Floating Rate Bond ETF seeks to track the investment performance of an index of high quality US floating rate bonds with remaining maturities between one month and five years. The interest payments of floating rate bonds adjust to changes in interest rates, making them attractive investments during periods of rising rates.

Annualized return over 5 years: 1.39 percent

Yield: 0.87 percent

Spending rate: 0.15 percent

Fund assets: $9.8 billion

Fidelity Investment Grade Bond Fund (FBNDX)

Fidelity Investment Grade Bond Fund is an actively managed fund that seeks to provide a high level of current income. The fund generally invests at least 80% of its assets in all types of high quality bonds.

Annualized return over 5 years: 1.61 percent

Yield: 1.86 percent

Spending rate: 0.45 percent

Fund assets: $8.5 billion

Schwab US Aggregate Bond Index Fund (SWAGX)

The Schwab US Aggregate Bond Index Fund seeks to track the investment performance of an index composed of the broad US Investment Grade bond market. The fund is offered with no minimum investment and low cost, making it a solid choice as a core bond portfolio in a diversified portfolio.

Annualized return over 5 years: 0.79 percent

Yield: 2.26 percent

Spending rate: 0.04 percent

Fund assets: $4.6 billion

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Further, investors are cautioned that past performance of investment products does not guarantee future price appreciation.

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