Anyone familiar with the world of retirement planning and investing understands the importance of bonds. It is not for nothing that the closer you are to retirement, the greater your bond allocation.
But which bonds should you include in your portfolio? Given the importance of diversification, you are better off gaining exposure to multiple individual bonds. And the most cost-effective way to do this is to buy bond funds, often exchange-traded funds, or ETFs.
Which Bond Funds Should You Buy?
For retirement planning, the best bond funds will generate regular income, preserve capital, provide diversification （across issuers, maturities and sectors）， be less sensitive to interest rate swings （shorter to intermediate maturities will be preferable）， provide inflation protection, offer low expense ratios and provide tax efficiency.
These top mutual funds and ETFs offer one or more of the above benefits:
ETF
Vanguard Total Bond Market ETF （ticker: BND）
BNY Mellon Core Bond ETF （BKAG）
Eaton Vance High Yield Municipal Income Class W （EWHYX）
Schwab High Yield Bond ETF （SCYB）
Manning & Napier High Yield Bond Class W （MHYWX）
Fidelity Inflation-Protected Bond Index Fund （FIPDX）
Vanguard Total International Bond ETF （BNDX）
iShares Core U.S. Aggregate Bond ETF （AGG）
Vanguard Short?Term Bond ETF （BSV）
Vanguard Total Bond Market ETF （BND）
Overview
BND is one of the most popular bond funds in the U.S. It is also the bond fund with the highest assets under management （AUM）， with $378 billion in net assets as of mid-November.
It invests in U.S. Treasury bonds, corporate bonds, government mortgage-backed securities, commercial MBS and other asset-backed securities.
Best Known for
BND is best known for its low expense ratio （0.03%） and its broad diversification within the U.S. market. A low expense ratio is crucial for maximizing your returns, while broad diversification helps to reduce portfolio risk.
Details
30-day SEC yield: 4.1%
Expense ratio: 0.03%
Year-to-date return （NAV）： 6.6%
Bond holdings: 17,678
BNY Mellon Core Bond ETF （BKAG）
Overview
BKAG provides broad exposure to the entire U.S. bond market. It invests in Treasury bonds, corporate bonds, MBS and ABS.
Best Known for
BKAG is best known for being the first zero-expense-ratio bond fund. This makes it appropriate for retirees seeking to maximize net returns since every dollar spent paying management fees is a dollar less that can be spent in retirement.
Details
30-day SEC yield: 4.3%
Expense ratio: 0%
Year-to-date return: 6.6%
Bond holdings: 5,073
Eaton Vance High Yield Municipal Income Class W （EWHYX）
Overview
EWHYX invests in high-yield municipal bonds issued by U.S. states, cities and local authorities. It does this to provide both high income and tax efficiency.
Best Known for
Since municipal bonds are exempt from federal tax, EWHYX is best known for its tax efficiency. Tax efficiency is one of the core goals of sound retirement planning; so, a bond fund that provides an extra layer of tax efficiency would be welcome by retirees.
Details
30-day SEC yield: 4.4%
Expense ratio: 0.61%
Year-to-date return: 3.1%
Bond holdings: 496
Schwab High Yield Bond ETF （SCYB）
Overview
SCYB invests primarily in U.S. high-yield （non-investment grade） corporate bonds.
Best Known for
SCYB is best known for its high-income yield. It is appropriate for investors who are close to retirement and are seeking to derive higher income from their nest egg without sacrificing a low expense ratio or reasonable capital appreciation.
Details
30-day SEC yield: 6.7%
Expense ratio: 0.03%
Year-to-date return: 6.8%
Bond holdings: 1,855
Manning & Napier High Yield Bond Class W （MHYWX）
Overview
MHYWX seeks to maximize long-term returns by investing in non-investment grade bonds issued by corporate and government entities.
Best Known for
MHYWX is best known for its focus on high yield, which makes it appropriate for retirees seeking income.
Details
30-day SEC yield: 8.1%
Expense ratio: 0.51%
Year-to-date return: 5.1%
Bond holdings: 90
Fidelity Inflation-Protected Bond Index Fund （FIPDX）
Overview
FIPDX invests in Treasury inflation-protected securities （TIPS）。 These are securities with principal and interest payments （since they are calculated based on the principal） that rise with higher inflation, as measured by the consumer price index.
Since retirees don’t have an employment income that can keep up with inflation, TIPS can help them deal with higher living costs without sacrificing quality of life.
Best Known for
FIPDX is best known for its inflation protection, which comes in handy for retirees during inflationary periods.
Details
30-day SEC yield: 4.8%
Expense ratio: 0.05%
Year-to-date return: 7%
Bond holdings: 48
Vanguard Total International Bond ETF （BNDX）
Overview
BNDX is an international bond fund that invests in investment-grade bonds issued outside the U.S. It is one of the largest and most popular international bond funds in the U.S. market.
Best Known for
BNDX is best known for providing exposure to the international bond market. Such international diversification can help to further reduce risk exposure and increase yield.
Details
30-day SEC yield: 2.9%
Expense ratio: 0.07%
Year-to-date return: 3.1%
Bond holdings: 6,581
iShares Core U.S. Aggregate Bond ETF （AGG）
Overview
AGG provides broad exposure to the U.S. investment-grade bond market. It invests in U.S. Treasurys, MBS, government agency bonds and corporate bonds.
Best Known for
AGG is best known for weighting toward intermediate-term bonds with an average duration of 6 years. This allows it to offer a higher yield than short-term bonds while being less sensitive to interest rate changes compared to long-term bonds.
Details
30-day SEC yield: 4.2%
Expense ratio: 0.03%
Year-to-date return: 6.6%
Bond holdings: 12,955
Vanguard Short?Term Bond ETF （BSV）
Overview
BSV invests in investment-grade bonds in the U.S. It focuses on short-term and high-quality U.S. Treasurys, corporate bonds, MBS and government agency bonds.
Best Known for
BSV is best known for its stability and low volatility. This is because it invests in short-term bonds （maturity between one and five years）， which are less sensitive to changes in interest rates.
Details
30-day SEC yield: 3.8%
Expense ratio: 0.03%
Year-to-date return: 5.4%
Bond holdings: 2,899