 Passive bond managers believe that the market is competitive and the prices are fairly set. So these managers try to control the risk related to the bond portfolio under their control. And among others well-known bond portfolio management strategies, a strategy exists that is known as indexing strategy. Under this strategy bond portfolio is tied to a bond market index and such bond index indexed portfolio has a same risk return relationship as possessed by the bond market index. By indexing we mean an attempt to replicate the performance of a given bond index. There is although another strategy that is bond immunization. In bond immunization strategies, some investors try to shield their overall financial status from the interest rate risk. The users of these strategies are financial institutions like banks, insurance companies and other pension funds and many other financial institutions. The purpose of these strategies is to shield the overall financial status of the institution from the exposure to interest rate riskiness. So what are bond index funds? Bond market indexing is similar to the stock market indexing. The idea is to create a portfolio that mirrors the composition of an index that measures the bond market. Bond index funds hold only a representative sample of the bonds in the actual index. Bond indexes generally include government bonds, corporate bonds, mortgage bonds and Yankee bonds in their universe. There are certain difficulties in developing the indexing strategy while to develop bond indexed portfolio. What these challenges or difficulties are? First inclusion of larger number of securities make it difficult to purchase each security in the index in proportion to its market value. Inedicate infrequent bond trades make it difficult to identify the owner in order to buy any bond from them at the fair market price. Also bond indices turn over more than the stock indices at the old bonds retire or repaid and the new bonds are issued in the market. It is impracticable to precisely replicate the broad bond indexes. Now what is the solution? Behave in alternative to these difficulties and that is the stratified sampling or a cellular approach. How these strategies work? First we need to stratify bond market into several subclasses and that division or classification may be on the basis of bonds maturity, open rate or the issuers credit risk. Next the bonds within each cell are considered homogeneous because we are classifying bonds according to a certain parameters. Next the percentages of entire universe filing within each cell are computed and reported as we can see this in the diagram at the bottom of the screen. And finally the portfolio manager sets a bond portfolio that represents each cell that matches the weight of the cell in the entire bond universe.