This comparison looks at two leading U.S. bond market ETFs: Vanguard Total Bond Market ETF (BND 0.36%) and iShares Core U.S. Aggregate Bond ETF (AGG 0.37%). Both aim to provide broad, investment-grade exposure to taxable U.S. bonds, making them core options for investors seeking income and portfolio diversification.
Snapshot (cost & size)
| Metric | BND | AGG |
|---|---|---|
| Issuer | Vanguard | IShares |
| Expense ratio | 0.03% | 0.03% |
| 1-yr return (as of Jan. 24, 2026) | 3.11% | 3.2% |
| Dividend yield | 3.85% | 3.88% |
| Beta | 0.27 | 0.27 |
| AUM | $384.63 billion | $136.5 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.
BND and AGG have similar expense ratios and dividend yields, but AGG actually pays considerably more in dividends, because its current price per share is $100.11 (as of Jan. 24, 2026), while BND’s is $74.25.
Performance & risk comparison
| Metric | BND | AGG |
|---|---|---|
| Max drawdown (5 y) | -17.93% | -17.83% |
| Growth of $1,000 over 5 years | $852 | $857 |
What's inside
With a 22-year track record, AGG is an established ETF that tracks the total U.S. investment-grade bond market, with 13,067 holdings. About 74% of the ETF’s holdings are AA-rated bonds, the second-highest rating a bond can receive for safety from debt default.
BND is very similar to AGG, as both ETFs have around 50% of their total bond holdings comprised of U.S. government bonds. However, approximately 72% of BND’s bonds are AAA-rated, the highest rating.
What this means for investors
With BND having a higher concentration of higher-rated bonds, it will be a less risky investment because it’s tied to bonds that are less likely to default. AGG, on the other hand, has more lower-rated bonds that have more potential to default, but there’s also more potential for yields to compensate for the increased risk it carries. Although AA bonds are very unlikely to default, so the risk gap isn’t significant.
When choosing between these two ETFs, it’s more about whether investors prefer a higher-risk/higher-reward approach to the bond market or a safer one.
Regardless, investors have to exercise more patience with bond ETFs, as the bond market arguably experienced its worst year in U.S. history in 2022, and it has been a slow climb back up in prices since then. Also, both ETFs pay dividends monthly, which may be a positive for investors who prefer more frequent payouts than the common quarterly frequency.
Glossary
ETF (Exchange-traded fund): A fund that trades on stock exchanges, holding a basket of underlying assets like bonds or stocks.
Expense ratio: Annual fund operating costs expressed as a percentage of the fund’s average assets.
Dividend yield: Annual cash distributions from a fund divided by its current share price, shown as a percentage.
Assets under management (AUM): The total market value of all assets managed within a fund or investment product.
Beta: A measure of how much an investment’s price moves relative to a benchmark, often the S&P 500.
Max drawdown: The largest peak-to-trough decline in an investment’s value over a specific period.
Total return: Overall investment performance including price changes plus all interest and dividend payments, assuming reinvestment.
Investment-grade bonds: Bonds rated as relatively low risk of default by major credit rating agencies.
Yield: The income generated by a bond or fund, usually expressed as an annual percentage of its price.
Diversification: Spreading investments across many securities to reduce the impact of any single holding’s performance.
Taxable bond: A bond whose interest payments are subject to federal income tax, and sometimes state or local taxes.
Inflation-protected bonds: Bonds whose principal and interest payments adjust with inflation, helping preserve purchasing power.
For more guidance on ETF investing, check out the full guide at this link.
