Bond Index: Tracking it with bond index funds

A bond index is a method of measuring the value of a section of the bond market. Investors use it to describe the market and compare the return on investments. Now that you know all about the bond market, let’s dive into bond indices: the different types and how they’re weighted.

What is a Bond Index?

A bond index is a method of measuring the value of a specific section of the bond market. It is calculated from the prices of selected bonds. A bond index is a tool used by many investors to describe the market. Investors and financial managers also use it to compare the return on specific investments.

Different Types of Indices

Bond indices are typically categorized based on their broad characteristics, such as whether they’re composed of government bonds, municipal bondscorporate bonds, high-yield bonds, etc. They can also be classified based on their credit rating or maturity.

Bond indices tend to be total rate-of-return indices. The main use for bond indices is to look at past performance of a market over time. They also tend to have yield, duration, and convexity, which are aggregated up from individual bonds.

Bond indices generally include more individual securities than do stock market indices. The indices are broader and tend to be more rule-based. This allows portfolio managers to predict which type of issues will be eligible for the index.

Bond Index Funds

An index is not something to be invested in directly. Think of it more as a mathematical construct. Many mutual funds and exchange-traded funds attempt to track an index, and those funds that do not may be judged against those that do.

There’s a lot to know about bond indices. Due to the large number of issues, they’re harder to replicate than stock market indices. Portfolio managers will typically define suitable benchmarks for their portfolios and use an already existing index. They’ll then purchase a subset of the issues available in their benchmark, and use the index as a measure of the market portfolio’s return. They do this in order to have something against which to compare their own portfolio’s performance.

Although it tends to get less media attention compared to the stock market, there’s still a whole lot of money to be earned in the bond market. To learn more about bonds, check out our free course Investing in Different Markets!


Updated December 25, 2022: At WallStreetSurvivor, our passion is helping you learn to invest in the stock market the RIGHT WAY! As part of our commitment to you, we are constantly evaluating all types of financial tools from stock picking newsletters to brokerage apps to stock screeners and more. Here are our favorites:


We have been tracking ALL of the Motley Fool stock picks since January 2016. That's over 5 years and 120 stock picks. Take a look at their stock picks' performance for the last 5 years:

  • Average return of their 120 picks from 2016 to 2020 is 233%
  • That beats the SP500's 88%
  • 84% of their picks are up
  • 57 of those 120 stocks have doubled

Now, no one can guarantee that their next picks will be as strong, but our 5 years of experience has been super profitable as you can see. They do pick some losers, but the key for investors is to invest equal dollar amounts in all of their picks. So if you have $1,000 to invest in the market each month, buy $500 of each of their 2 monthly stock picks.

Normally the Motley Fool service is $199 per year but they are currently offering it at their lowest price ever: Just $79 for 12 months..

CLICK HERE to get the next Motley Fool Stock Pick 


Robinhood was the first brokerage site to NOT charge commissions when they opened in 2013. They just past 10,000,000 accounts and to celebrate they are offering one free share of stock (value up to $200) when you open a new account. In addition, they will give you another free share of stock (up to $250) for each friend that you refer, max 3 friends a year.

Here's the details: You must click on a special promo link to open your new Robinhood account. Then when you fund your account with at least $10, you will receive one stock valued between $5 and $200. Then, you will get a link to share with your friends. Every time one of your friends opens an account, you will receive another free stock valued between $5 and $200.

Claim your free stock NOW


ZACKS Investment Research just released their list of 5 Stocks Likely to Double. ZACKS has been around since 1978 and their top rated stocks have an average gain of 25.35% per year over the last 30+ years. Best of all, you can get this list of 5 stocks for FREE by CLICKING HERE.

PRICE DROP: Get 12 months of Motley Fool stock picks and save $120. New Subscribers can try the service now for just $79.