Bond ETFs Are Surging in Popularity in 2025. Here Are 5 of the Best

Investors are betting big on bond exchange-traded funds.

Why it matters: Hundreds of billions of dollars have poured into bond ETFs in the first nine months of 2025. And more of these strategies have hit the market over the past several years. It’s important to remember that some bond ETFs are riskier than others. What should investors consider before tweaking their portfolio? Dan Sotiroff, a senior manager research analyst at Morningstar Research Services and the editor of the Morningstar ETFInvestor newsletter, discusses that and shares five top ideas for income investors.

12 Questions on Bond ETFs in 2025

1. Bond ETFs are having a banner year. Why are investors turning to these investments?
2. Which is getting the bigger slice: passively or actively managed bond ETFs?
3. What are the four major types of bond ETFs, and how do they differ?
4. This month’s edition of Morningstar ETFInvestor analyzed more than a dozen bond ETFs. What makes a core bond ETF a solid portfolio building block?
5. What’s the top idea that’s received high marks from Morningstar?
6. We’re shifting from the least risky to the next level up, core-plus. What do these bond ETFs typically offer that an index-tracking ETF does not?
7. Can you tell us one intermediate core-plus bond ETF that’s earned a Gold rating from Morningstar?
8. Multisector bond ETFs take on a bit more risk than the previous two categories, and that comes with an expectation of more income. Should income investors skip the others and start here?
9. It’s time for the third top idea. What multisector bond ETF should folks consider?
10. High-yield bond ETFs are the riskiest among the categories we’re discussing today. What additional risks are investors taking on for the juicy yields?
11. Morningstar does not currently rate any actively managed high-yield bond ETFs. Is there one that income investors should watch?
12. What’s the takeaway for folks figuring out if these types of bond ETFs fit in their portfolios?

Key Quote on the Popularity of Bond ETFs in 2025

“A lot of stock ETFs are just really picked over. We’ve seen kind of everything. We’ve seen indexes, strategic beta, thematics, ESG, all that type of stuff. It’s all out there. It’s pretty saturated, and a lot of the stuff is already competing on price. So, when you look at the new areas that you can actually go into and maybe compete in or get a first-mover advantage, I think it’s going to be more on fixed income and the bond market.”

The Takeaway: Decide what role bond ETFs will serve in your portfolio. These ETFs are designed to help diversify your stock holdings, according to Sotiroff. Bond ETFs tend to lose diversification benefits the riskier they become. The ETFInvestor editor suggests starting with a core index-tracking bond ETF from Vanguard or iShares that has earned high marks from Morningstar. If you’re willing to accept more risk for higher yield, consider core-plus, multisector, and high-yield bond ETFs.

More From Morningstar on Bond ETFs in 2025

About a trillion dollars have flowed into exchange-traded funds so far in 2025, and bond ETFs are claiming a third of the inflows. Passively managed bond ETFs are holding a narrow lead over their actively managed siblings because they have had a head start. A lot of people use some of the biggest and oldest bond ETFs from Vanguard and iShares as a core holding.

Bond ETFs may appeal to investors for a variety of reasons, such as saving for a home or planning to retire sooner rather than later. Morningstar’s Tori Brovet writes about the best bond ETFs from three categories: core bond funds, short-term bond funds, and specialized bond funds. Morningstar’s Lan Anh Tran examines three great bond ETFs taking unconventional approaches that are leading to good results.

Securities mentioned in this episode:

Vanguard Total Bond Market ETF BND

iShares Core U.S. Aggregate Bond ETF AGG

Fidelity Total Bond ETF FBND

JPMorgan Income ETF JPIE

Vanguard High-Yield Active ETF VGHY

In case you missed it: Sotiroff appeared on Investing Insights on July 25 and discussed another exchange-traded fund from J.P. Morgan, JPMorgan Equity Premium Income ETF JEPI.