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AGG vs. BND: Which Bond ETF Do You Choose?

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While corporate bonds are increasingly popular among investors—along with junk securities due to their outsized yield—a broad bond approach is taken by many as well. For ETFs that target this broad fixed income space, generally investors focus in on two ultra-popular ETFs; the Vanguard Total Bond Market ETF (BND - Free Report) and the iShares Core Total U.S. Bond Market ETF (AGG - Free Report) .

These two giants combine to take up over $30 billion in total assets, making them both among the top five bond ETFs by total AUM. Furthermore they both track the same benchmark, the Barclays Capital U.S. Aggregate Bond Index, so exposure is going to be quite similar (see Target Date Bond ETFs Best or Worst Fixed Income Funds?).

So how do investors pick between the two?

Well, although they are very similar, there are actually some key differences between the two and their fund holdings, expenses, and tradability. So while they might appear identical, some differences in sampling and other important factors should be known by investors before deciding between either of these for their portfolio:

Vanguard Total Bond Market ETF (BND - Free Report)

This ETF is the slightly more popular of the two, having amassed over $17 billion in total assets. Volume is also a tad better for this fund, but both see more than one million shares move hands on a daily basis so bid ask spreads shouldn’t be too much of a concern.

In terms of exposure, it is well spread out with intermediate term bonds accounting for roughly 40% of assets, long term another 40%, and short term the rest. Meanwhile from a bond type look, federal debt accounts for about 45% of the product, with corporates and collateralized securities accounting for the rest (see Seven Biggest Bond ETFs by AUM).

Performance has also been strong in this ETF, with more than 29.8% gains in the trailing five year period. Yields, however, are a little light thanks to the heavy government bond component, helping to push the 30-Day SEC yield to just 1.67%.

iShares Core Total U.S. Bond Market ETF (AGG - Free Report)

While this ETF may not be as popular or widely traded as BND, it is older than its Vanguard counterpart, and thanks to its rebranding, is now cheaper too. In fact, the ETF charges investors just eight basis points a year in fees, beating out BND by two basis points a year.

The ETF also has a bit more of a long-term focus, as these securities account for roughly 55% of assets, followed by just 27% for intermediate term notes. Meanwhile, federal debt only takes up about one-third of the assets, putting collateralized debt at roughly half the portfolio, and corporates with nearly all of the rest, according to

In addition to having a lower expense ratio, AGG also has a slightly lower yield, just four basis points lower than BND in fact. However, performance in this iShares ETF has been better over the long-term as in the trailing five year period the fund has gained 28.9% (also see Forget Interest Rate Risk with These Bond ETFs).

The Bottom Line

So while AGG and BND both offer up quality exposure across the various types of fixed income securities in the U.S. market, they do so in slightly different ways with different levels of both liquidity and fees.

Although these differences might not appear to be much at first glance, these issues can definitely influence returns and should be something to note by investors before deciding which of the two to purchase during these uncertain market times.





Expense Ratio



Total Holdings



30-Day SEC Yield



Treasury Component



Top Holding

T-Bill, due 2017 (12.2% of fund)

T-Bill, due 2014 (2.4% of fund)

Five Year Performance (



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