AGG ETF: A Guide To Trading iShares Core U.S. Aggregate Bond ETF 

The iShares Core U.S. Aggregate Bond ETF (AGG) offers a winning combination of low fees and broad exposure to investment-grade U.S. bonds. Here’s what this popular bond fund is all about, and how you can trade it.  

The iShares Core U.S. Aggregate Bond ETF (AGG), is one of several exchange-traded funds that tracks the Bloomberg U.S. Aggregate Bond Index. However, it is noteworthy for being the largest fund in its class.  

There are many reasons why investors prefer the fund, among which are affordability, ease of management, and low credit risk. In May 2022, analyst firm Morningstar awarded AGG a Morning Analyst Rating of Gold, recognising it as one of the best bond funds around ^[1]. 

Let’s take a closer look at AGG, how it has performed so far  and how you can trade this fund.   

AGG – An overview 

Net value of fund	USD 76.5 billion
Benchmark index	Bloomberg U.S. Aggregate Bond Index
Exchange	NYSE
Asset class	Fixed income
Dividends paid	Monthly
Net expense ratio	0.03%
Fund launch date	22 Sep 2003
12-month trailing yield	2.22%
Performance	Annualised yield: 2.90%  Benchmark: 3.09%
Growth since inception	+ 68.30% (as of 21 Oct 2022)
Total number of holdings	10,488
Top 10 holdings	• U.S. Treasury (41.57%)  • Federal National Mortgage Association (13.18%)  • Government National Mortgage Association II (5.81%)  • Federal Home Loan Mortgage Corporation (5.55%)  • Uniform MBS (2.58%)  • Bank of America Corp (0.67%)  • Federal Home Loan Mortgage Corporation – Gold (0.67%)  • JP Morgan Chase & Co (0.64%)  • Morgan Stanley (0.43%)  • Goldman Sachs Group (0.42%)

What is iShares Core U.S. Aggregate Bond ETF? 

iShares Core U.S. Aggregate Bond ETF (AGG) is an exchange-traded fund that tracks the performance of leading US dollar-denominated investment-grade bonds.  

At the time of writing this article, AGG has a net value of USD 76.5 billion. The fund was launched on 22 Sep 2003 on the NYSE. 

AGG is a fixed-income investment fund and offers dividend payouts every month. It is benchmarked against the Bloomberg U.S. Aggregate Bond Index which offers broad-based exposure to top U.S. debt issuers, including taxable, investment-grade U.S.-dollar-denominated bonds with at least one year until maturity. 

The Index is mostly comprised of one of three categories of bonds – U.S. Treasuries, corporate bonds, or agency mortgage-backed securities.  

Furthermore, holdings are weighted according to market value, with an emphasis on the largest and most liquid asset, rendering it an accurate benchmark for the entire U.S. investment-grade bond market.  

How has AGG performed so far? 

In the nearly 20 years since its inception, AGG has grown by a respectable 68.3%.  

On an annualised basis, the ETF has managed a yearly yield of 2.90%, close to the benchmark of 3.09%. Currently, AGG has a 12-month trailing yield of 2.22%. 

The fund remains highly popular and enjoys high trading volume with over 8 billion shares traded daily, as at 1 Nov 2022 ^[3].  

What are the holdings of AGG? 

AGG is composed of nearly 10,500 different holdings, with close to 70% of the fund’s value taken up by its top five holdings. 

By far, the largest holding in AGG at over 41% is the U.S. Treasury –. According to Morningstar, 22% of the fund’s assets carried a AAA credit rating as of April 2022; this is in contrast to the category average of 50% ^[4].  

The bond fund’s top 10 holdings are shown in the table above; notable entries include top investment banks JP Morgan, Goldman Sachs and Morgan Stanley; U.S. agency mortgage-backed debt instruments, as well as Bank of America. 

What is AGG’s expense ratio? 

AGG offers a 0.01% discount on the total management fee of 0.04% (management fee of 0;03% + acquired fund fees of 0.01%) – which means its net expense ratio is 0.03%. This is a fair rate for passively managed, fixed-income investment funds.  

For comparison, the similarly structured Fidelity U.S. Bond Index Fund (FXNAX) offers 0.025% expense ratio, while the Schwab U.S. Aggregate Bond Index Fund (SWAGX) has an expense ratio pegged at 0.04^[5]. 

Why Invest in AGG 

Easier management 

The interest AGG receives from the bonds in its portfolio is collated and automatically paid out to investors. This saves investors from the need to keep track of different maturity bond dates and dividend payout schedules. 

As old bonds mature and become fully redeemed, AGG automatically adds new bonds to its holdings.  

Exposure to top investment-grade bonds  

The AGG is designed to track the Bloomberg U.S. Aggregate Bond Index, which is recognised as one of the best total bond market indices, and regularly used by bond traders and managers of mutual funds and exchange-traded funds (ETFs) to measure their relative performance. 

Accordingly, investing in AGG provides broad exposure to the U.S. bond market, including top investment-grade bonds – without the need to investigate several individual bonds.  

Portfolio diversification 

AGG allows investors to achieve a degree of diversification in their portfolios.  

As bonds carry lower risk compared to other assets such as stocks, investing in an ETF like AGG can be a good way to balance out an uneven portfolio.  

Low cost and low barrier to entry  

With an expense ratio of just 0.03%, AGG has a very low cost of investing, which may be attractive to some investors. However, while 0.03% is indeed low, this figure must be evaluated against the bond fund’s annualised returns of under 3% ^[6].   

Additionally, AGG’s structure as an ETF lowers the barrier-to-entry for investors, allowing investment at lower capital – especially at brokerages that offer fractional shares.  

How to trade AGG? 

If you’re planning to invest in AGG, you can sign up with an online brokerage that offers access to the U.S. bond market. Do a search on the broker’s website for “AGG” or “iShares Core U.S. Aggregate Bond ETF” to confirm that the fund is offered for investment.  

Before making a transaction, take note of any platform or broker fees that may apply; these are separate from the 0.03% expense ratio charged on AGG.   

Trade AGG CFDs with Vantage 

Vantage offers Contracts for Difference (CFDs) trading for AGG and several other leading ETFs – including the tech-stock focused Invesco QQQ Trust (QQQ), SPDR S&P 500 ETF Trust (SPY), and the Vanguard Total Bond Market ETF (BND). 

CFDs are catered towards traders who seek to gain indirect exposure to AGG and other bond funds, potentially benefiting from their price movements, under both bear and bull market conditions. All this can be achieved without having to purchase actual fund shares. 

Additionally, Vantage CFDs offer leveraged trades to maximise your opportunities, mobile trading platforms for on-the-go-trading, and a range of risk management tools to help limit losses. 

Sign up to trade ETFs with Vantage today.  

References: 

1. “What Gives an Edge to iShares Core US Aggregate Bond ETF? – Morningstar”. https://www.morningstar.com/articles/1089689/what-gives-an-edge-to-ishares-core-us-aggregate-bond-etf. Accessed 16 Nov 2022 

2. “iShares Core U.S. Aggregate Bond ETF (AGG) – Nasdaq”. https://www.nasdaq.com/market-activity/funds-and-etfs/agg. Accessed 16 Nov 2022 

3. “iShares by BlackRock, iShares Core U.S. Aggregate Bond ETF – iShares by BlackRock”. https://www.ishares.com/us/products/239458/ishares-core-total-us-bond-market-etf#/. Accessed 16 Nov 2022 

4. “Best Total Bond Market Index Funds of 2022 – Forbes”. https://www.forbes.com/advisor/retirement/best-total-bond-market-index-funds/. Accessed 16 Nov 2022 

5. “iShares Core U.S. Aggregate Bond ETF – BlackRock”. https://www.blackrock.com/us/individual/products/239458/ishares-core-total-us-bond-market-etf. Accessed 16 Nov 2022 

6. “iShares Core U.S. Aggregate Bond ETF – BlackRock”. https://www.blackrock.com/us/individual/products/239458/ishares-core-total-us-bond-market-etf. Accessed 16 Nov 2022