BND vs. AGG: Comparing Total Bond Market ETFs
In brief
BND and AGG both provide broad exposure to taxable, investment-grade U.S. dollar bonds, but they follow different versions of the U.S. aggregate bond market and can differ modestly in holdings, weights, duration, and tracking.
- Published
- Last reviewed
The main idea
Treat BND and AGG as close core-bond alternatives, then verify benchmark scope, current portfolio characteristics, expenses, and switching costs.
At a glance
BND benchmark
U.S. Aggregate Float Adjusted
Vanguard uses a float-adjusted broad U.S. investment-grade bond benchmark.
Vanguard ↗AGG benchmark
Bloomberg U.S. Aggregate
iShares identifies the standard Bloomberg U.S. Aggregate Bond Index.
iShares ↗Both are broad core-bond funds
BND and AGG hold investment-grade, U.S. dollar-denominated taxable bonds across government, agency, mortgage-backed, and corporate sectors under their respective benchmark rules.
Neither is a cash substitute: share prices respond to interest rates, spreads, prepayments, and market liquidity, and principal can decline.
Float adjustment creates a benchmark distinction
BND's benchmark adjusts portions of the market for securities unavailable to public investors, while AGG follows the standard Bloomberg U.S. Aggregate Bond Index. The distinction can produce modest differences in weights and returns.
Compare the current benchmark names and methodology in issuer documents rather than assuming the portfolios are literally identical.
Duration and yield change over time
Effective duration estimates price sensitivity to interest-rate changes, while 30-day SEC yield standardizes recent net investment income. They answer different questions and both move as holdings and markets change.
Use figures from the same date and issuer definition. Do not compare one fund's trailing distribution yield with the other's SEC yield.
Switching may accomplish little
Both issuers reported a 0.03% expense ratio when reviewed. Taxes, bid-ask spreads, and time out of the market can exceed any expected benefit from replacing one close substitute with the other.
A new investor can choose based on brokerage access, spreads, tracking preference, and portfolio implementation. An existing investor should first identify a concrete problem the switch solves.
Before choosing a fund
Questions to verify
- Verify both current benchmark names.
- Compare duration, credit quality, and sector weights on one date.
- Use matching yield definitions.
- Estimate taxes and spreads before switching.
- Keep emergency cash separate from intermediate core bonds.
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