Editors' Index Fund Picks - Domestic Bond Funds By IndexFunds.com Staff October 15, 2002

Bond index funds can reduce risk in a portfolio. Indexing bonds also makes sense because of their lower yields compared to stocks. We like short-term bonds because of their low risk and lack of correlation with equity markets.

Top Short-Term Bond Funds - in no particular order
Fund name	Ticker	Expense ratio
Vanguard Short-Term Bond Index	VBISX	0.21%
Schwab Short-Term Bond Market Index	SWBDX	0.35%

Top Intermediate-Term Bond Funds - in no particular order
Fund name	Ticker	Expense ratio
Vanguard Total Bond Index	VBMFX	0.22%
Vanguard Intm Bond Index	VBIIX	0.21%
Summit Lehman Bond Index Fund	SALAX	0.60%
Schwab Total Bond Market Index	SWLBX	0.35%
E*TRADE Bond	ETBDX	0.65%
Dreyfus Bond Market Index Inv	DBMIX	0.40%

Top Long-Term Bond Funds - in no particular order
Fund name	Ticker	Expense ratio
Vanguard Long-Term Bond Index	VBLTX	0.21%
Eclipse Indexed Bond	NIIBX	0.50%

For each asset class there are several popular indexes to choose from. Our goal is to identify the funds that track those indexes efficiently and cheaply. None of the funds on our list charge front or deferred loads, or 12b-1 fees. We listed some funds with fairly high fees because investors who choose to work with broker or advisors understand this may be part of how they earn their fees. In the case of both ETFs and funds only available through advisors (such as the Dimensional Fund Advisor or DFA funds) there are additional transaction or holding costs.

Our list is by no means complete, but we think it's a good starting point. We're very interested in comments you might have. We're willing to consider even higher-cost funds for our list, but we need to be convinced. Please post comments to our bulletin boards.

For all lists, the funds are in no particular order and not listed by preference.

Of course, an asset allocation plan is more than just finding good building blocks. They must fit together. But we think this is a good start.