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AGG and BND are both known as total bond market index funds, which means that they seek to replicate the performance of the entire U.S. bond market. These two bond ETFs have many similarities but there are subtle differences that investors need to know before choosing one fund over the other. 

Bond ETFs: AGG vs BND 

AGG and BND are fixed income exchange-traded funds. Both ETFs aim to replicate the performance of an underlying index that provides investors with a convenient way to access a broad portfolio of bonds. However, the benchmarks are slightly different and this causes some small variations in performance and yield. 

By investing in AGG or BND, investors can gain diversified exposure to the U.S. investment-grade bond market in a single investment vehicle. As ETFs, AGG and BND are traded on stock exchanges like individual stocks, allowing investors to buy and sell shares throughout the trading day at market prices. 

What Is AGG?   $iShares Core U.S. Aggregate Bond ETF(AGG)$

The iShares Core U.S. Aggregate Bond ETF (AGG) is an ETF offered by BlackRock, one of the largest asset management companies. AGG seeks to track the performance of the Bloomberg Barclays U.S. Aggregate Bond Index, which is a widely recognized benchmark for the U.S. bond market. 

The Bloomberg Barclays U.S. Aggregate Bond Index represents a broad and diversified measure of the U.S. investment-grade bond market. It includes a wide range of fixed income securities, such as Treasury bonds, corporate bonds, mortgage-backed securities and government agency bonds. The index weights its components based on market value and provides investors with exposure to various sectors and maturities within the U.S. bond market. 

What Is BND?   $Vanguard Total Bond Market ETF(BND)$

The Vanguard Total Bond Market ETF (BND) is an ETF offered by Vanguard Group, one of the largest investment management companies. BND seeks to track the performance of the Bloomberg Barclays U.S. Aggregate Float Adjusted Index, which is a benchmark that represents the U.S. investment-grade bond market. 

The Bloomberg Barclays U.S. Aggregate Float Adjusted Index includes a wide range of fixed income securities, such as Treasury bonds, government agency bonds, corporate bonds and mortgage-backed securities. The index weights its components based on market value and incorporates adjustments to account for the portion of bonds available to investors. 

AGG and BND Side-by-Side Comparison  

Here are the key metrics for comparing AGG and BND, with data as of April 30, 2023:

AGG and BND Comparison: Key Takeaways  

For a quick overview of the AGG versus BND comparison, here are the key takeaways:  

• AUM: Although BND is slightly larger than AGG, both ETFs have assets under management in the billions, which makes them both large enough to provide sufficient liquidity for trading. Thus, neither has a significant edge here.  

• Expense ratio: AGG and BND have the same low expense ratio of just 0.03, or $3 for every $10,000 invested.  

• Yield: AGG’s 30-day SEC yield of 3.90% is slightly lower than BND’s 4.09% yield. And 19 basis points is not a large difference in yield, but it can be significant for large investments over long periods of time. 

• Performance: BND has consistently outperformed AGG, although by a thin margin.  

AGG vs BND: Performance  

When it comes to performance, BND wins the battle by a range of 2 to 10 basis points. While this difference may translate to just a few dollars per year for every $10,000 invested, frugal investors may find this attractive. 

AGG vs BND: The Differences  

AGG and BND are both popular ETFs that provide exposure to the U.S. investment-grade bond market. While they have similar objectives, there are a few key differences between these ETFs, including fund providers, index tracking and trading volume. 

The main differences between AGG and BND include: 

• Fund providers: AGG is offered by BlackRock's iShares, while BND is offered by Vanguard Group. While both companies are well-established and reputable asset management firms, the choice of provider may depend on an investor's preference or familiarity with a particular fund company. 

• Index tracking: AGG tracks the Bloomberg Barclays U.S. Aggregate Bond Index, while BND tracks the Bloomberg Barclays U.S. Aggregate Float Adjusted Index. While both indexes are widely recognized benchmarks for the U.S. investment-grade bond market, there are some differences in their construction methodologies. The specific index composition and weighting may vary slightly, potentially leading to minor differences in the performance and holdings of the ETFs. 

• Trading volume and liquidity: Trading volume and liquidity can impact the ease of buying and selling shares of an ETF. AGG tends to have higher trading volume and liquidity compared to BND, which can result in narrower bid/ask spreads and potentially better execution for investors. 

AGG vs BND: The Similarities  

There are multiple similarities between AGG and BND, including the funds’ investment objectives, index tracking, expense ratios and structure. Investors should carefully study these similarities along with the differences before choosing between the two funds. 

The main similarities between AGG and BND include: 

• Investment objective: Both AGG and BND aim to track the performance of broad-based bond market indexes that represent the U.S. investment-grade bond market. They seek to provide investors with exposure to a diversified portfolio of fixed income securities. 

• Index tracking: AGG tracks the Bloomberg Barclays U.S. Aggregate Bond Index, while BND tracks the Bloomberg Barclays U.S. Aggregate Float Adjusted Index. While the index names and methodologies may differ slightly, both indexes cover a similar universe of U.S. investment-grade bonds, including Treasury bonds, government agency bonds, corporate bonds and mortgage-backed securities. 

• Diversification: AGG and BND provide exposure to the overall U.S. bond market, including both government and corporate bonds. This diversification helps to spread risk across thousands of bonds rather than a more concentrated risk on single bonds. 

• Expense ratios: AGG and BND share the same low expense ratio of just 0.03%. Low expenses help to keep costs down for investors. 

• ETF structure: Both AGG and BND are exchange-traded funds, meaning they trade on stock exchanges like individual stocks. This structure provides investors with the flexibility to buy and sell shares throughout the trading day at market prices. 

AGG or BND: Who Should Invest  

AGG and BND can both be suitable for investors looking for broad exposure to the U.S. bond market. Some investors may be seeking diversification in a long-term investment portfolio, while others may be looking for an income-producing investment that has more stable returns compared to stocks. BND offers slightly higher returns and yields, whereas AGG offers greater liquidity through higher trading volumes. 

AGG vs BND: ETF Comparison Tool  

Investors can use etf.com’s ETF comparison tool and look at side-by-side data on any two ETFs in the entire investment universe. To use the tool, simply enter ticker symbols, click the “Compare” button and you can compare current data, such as AUM, expenses, performance, holdings and more. For example, here are the tool’s results for the AGG vs BND comparison. 

Bottom Line 

AGG and BND are popular options for investors seeking broad exposure to the U.S. bond market, and they track similar indexes, albeit with some differences in index construction. Investors may want to consider expense ratios, index tracking and liquidity when deciding between AGG and BND. Additionally, it can be beneficial to review each fund's prospectus for a more comprehensive evaluation. 

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