AGG ETF LB Rating – What You Should Know Before Investing

Category: Core Bond Funds
Style: Passive
LB Rating: ****  4 Stars
Last Updated: 9/5/2012

Useful Links

Choosing a bond fund with LB Ratings
AGG ETF Price Chart
The 5 Major Bond ETFs and The Indexes They Track



AGG ETF Overview

Summary: The AGG ETF would be a solid choice for a passive core bond fund.

Commentary: The AGG ETF is a good, inexpensive way to get exposure to the bond market. If interest rates do not change then you will earn around 2.5% from interest payments per year.  However, the real value of this fund is that is provides your portfolio some protection against the volatility of the stock market.

The AGG ETF has an intermediate term duration, meaning that If interest rates rise by 1%, the AGG ETF will tend to lose about 5% of its value.  Conversely if interest rates fall by 1% then the AGG ETF will gain around 5%.


AGG ETF Rating Criteria

Fees: Good. Compared to active core bond funds and on absolute basis, the annual expense fee of 0.20% is tiny. However, a very similar competing product, BND, charges half the fees. (Learn more about bond ETF fees here.)

Tracking: Excellent. The index it tracks does an excellent job tracking the US investment grade bond market, excluding municipal bonds. Over 3 and 5 year time periods, over 98% of the AGG ETF’s performance can be attributed to changes in the index.

Liquidity: Excellent. The AGG ETF has over $15 billion dollars in assets and typically trades at a price that is very, very close to its NAV.  Learn more about Bond ETF NAV here.


Learn More

Bond ETFs – What they are and how they work
Bond Mutual Funds vs. Bond ETFs
Passive vs. Active Bond Funds – Which option is better for you? 
The 10 Best Bond ETF sites

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