Total Bond Market



The total bond market provides broad exposure to US investment grade bonds.  It includes US government bonds of all maturities as well as high grade corporate bonds.  The weighted average maturity varies, but is generally around 7 years — the same as an intermediate treasury fund.  It is probably the single most popular bond option for everyday investors and a very common complement to a total stock market or large cap blend fund.

Note the red block in the 70’s.  Bonds increase in value when interest rates fall and decrease in value when they rise.  Rates skyrocketed in the 70’s and have been declining ever since.  But the goal of a robust portfolio is not to predict when rates may rise again, but to construct a portfolio that does well even when they do.  Try adding some bonds to your asset allocation, and you may be surprised just how resilient a diverse portfolio can be.


Index Funds


Source Data
  • 1970-1975: Longinvest’s bond funds spreadsheet (10-2 model), R*
  • 1976-1986: Bloomberg Barclays US Aggregate Bond TR USD, P
  • 1987+: Vanguards Total Bond Index Fund (VBMFX), P

(*) Good total bond market data is not available until 1976.  Before that, I use a synthetic model that models treasury bonds but excludes corporate bonds.  Because TBM is about 60% treasuries and investment grade corporate bonds usually do not vary too far from treasuries, this is a good replacement with low error.


Portfolios with Total Bond Market assets

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