AGG vs BND: Which Total Bond ETF Should You Own in 2026?
Compare AGG and BND — the two largest bond ETFs with 90%+ overlap. We break down expense ratios, yields, duration, credit quality, and which bond ETF is better for your portfolio.
Quick Summary
AGG and BND are nearly identical bond ETFs tracking very similar Bloomberg U.S. Aggregate Bond indexes. With 90%+ holding overlap, the same 0.03% expense ratio, and almost identical yields, there's no wrong choice. BND is slightly larger with Vanguard's dual-class tax structure. AGG has marginally higher daily trading volume.
AGG vs BND at a Glance
| Feature | AGG | BND |
|---|---|---|
| Full Name | iShares Core U.S. Aggregate Bond ETF | Vanguard Total Bond Market ETF |
| Issuer | iShares (BlackRock) | Vanguard |
| Expense Ratio | 0.03% | 0.03% |
| AUM | ~$110B | ~$120B |
| 30-Day SEC Yield | ~4.5% | ~4.5% |
| Average Duration | 6.1 years | 6.0 years |
| Number of Bonds | ~12,000 | ~11,000 |
| Holding Overlap | 90%+ | 90%+ |
Check the live overlap data: AGG vs BND comparison
What Do These ETFs Hold?
Both AGG and BND invest in investment-grade U.S. bonds:
| Sector | AGG | BND |
|---|---|---|
| U.S. Treasuries | ~41% | ~42% |
| Mortgage-Backed (MBS) | ~27% | ~27% |
| Corporate Bonds | ~25% | ~24% |
| Government Agency | ~2% | ~2% |
| Other | ~5% | ~5% |
The allocations are nearly identical because both track the Bloomberg U.S. Aggregate Bond Index (AGG) or its close variant, the Bloomberg U.S. Aggregate Float Adjusted Index (BND).
Credit Quality
| Rating | AGG | BND |
|---|---|---|
| AAA | ~70% | ~69% |
| AA | ~3% | ~3% |
| A | ~11% | ~12% |
| BBB | ~16% | ~16% |
Both ETFs are heavily investment-grade. Neither holds high-yield ("junk") bonds. This makes them conservative fixed-income holdings suitable for most portfolios.
Performance Comparison
| Period | AGG | BND | Difference |
|---|---|---|---|
| 1 Year | +3.2% | +3.3% | 0.1% |
| 3 Year | -2.1% | -2.0% | 0.1% |
| 5 Year | -0.5% | -0.4% | 0.1% |
| 10 Year | +1.4% | +1.5% | 0.1% |
Performance differences are within 0.1% across all time periods. These are functionally identical funds.
The elephant in the room: Both AGG and BND have had rough 3-5 year returns due to the rapid interest rate increases since 2022. This is normal for intermediate-term bond funds during rising rate environments.
Interest Rate Sensitivity
Both have similar duration profiles (~6 years), meaning:
- If rates rise 1%: Both drop ~6%
- If rates fall 1%: Both gain ~6%
For lower rate sensitivity, consider short-term bond ETFs like BSV or SHV. For higher yield with more risk, consider corporate bond ETFs like LQD or high-yield HYG.
Expense Ratio
Both charge 0.03% — the same ultra-low cost. On $100K invested:
- Annual fee: $30
- Monthly cost: $2.50
No advantage either way on fees.
Structural Differences
AGG (iShares/BlackRock)
- Standard ETF structure
- Slightly more liquid (higher average daily volume)
- Better for institutional/large traders
- Available commission-free at virtually all brokers
BND (Vanguard)
- Dual-class ETF/mutual fund structure (Vanguard patent)
- Shared tax lots with VBTLX (Admiral Shares mutual fund)
- Slightly better tax efficiency (theoretical advantage)
- Natural choice for Vanguard account holders
Why Does Bond Overlap Matter?
Unlike stock ETFs where you want to minimize overlap for diversification, the overlap between AGG and BND isn't a "problem" — it simply means they're the same thing with different wrappers.
You should NOT own both AGG and BND. Pick one. Owning both adds complexity without any diversification benefit.
When Do You Need Bonds?
Bonds serve specific roles in a portfolio:
- Reduce volatility — Bonds zig when stocks zag (usually)
- Preserve capital — Lower maximum drawdown than stocks
- Generate income — Current yields around 4.5%
- Rebalancing anchor — Sell bonds to buy stocks during crashes
Common Bond Allocations
| Age/Goal | Stock/Bond Split | Bond ETF Amount |
|---|---|---|
| Aggressive (20s-30s) | 90/10 | $10K per $100K |
| Moderate (40s-50s) | 70/30 | $30K per $100K |
| Conservative (60s+) | 50/50 | $50K per $100K |
| Target-Date 2060 | 90/10 | Auto-managed |
Which Should You Choose?
Choose AGG if:
- You use Fidelity, Schwab, or any non-Vanguard broker
- You trade frequently and want marginally better liquidity
- You already own AGG in existing accounts
- You prefer BlackRock/iShares fund family
Choose BND if:
- You use Vanguard (natural fit, easy to manage)
- You hold VBTLX in another account (same underlying fund)
- You want the dual-class structure's tax efficiency
- You prefer Vanguard's fund family
The Honest Answer
They're the same fund. Pick whichever your broker offers or whichever you already own. If starting fresh with no preference, BND has a very slight theoretical edge from Vanguard's dual-class structure, but in practice the difference is immeasurable.
Common Questions
Should I switch from AGG to BND? No. The tax cost of selling AGG in a taxable account exceeds any theoretical benefit. In an IRA, you could switch for free, but there's no meaningful benefit.
What about SCHZ (Schwab)? SCHZ tracks the same index and charges 0.03%. It's equally good if you use Schwab. Compare AGG vs SCHZ.
Are bonds worth owning at all in 2026? With yields at ~4.5%, bonds offer meaningful income plus portfolio stability. They're worth owning for diversification, especially if you're over 40 or risk-averse.
What about Treasury bills vs bond ETFs? T-bills (SHV, BIL) have lower rate risk but also lower yields when rates eventually fall. AGG/BND provide more yield upside if rates decline.
Conclusion
AGG and BND are virtually identical bond ETFs at the same price (0.03% expense ratio). Choose BND for Vanguard, AGG for everything else. The real decision isn't AGG vs BND — it's how much of your portfolio should be in bonds at all.
See the full overlap analysis: AGG vs BND
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