Quick Verdict
- Our Rating: ★★★★½ (4.5/5)
- Best For: Long-term investors who want a low-cost, diversified core bond holding
- Not Ideal For: Investors seeking high income, inflation protection, or low sensitivity to interest rates
- Expense Ratio: 0.03%
- Our Take: AGG pairs an ultra-low fee with broad, high-quality exposure to the U.S. bond market, and it has tracked its benchmark closely. Its 5.7-year duration means it can lose value when rates rise, as its negative one-year and five-year returns show.
Table of Contents
What Is the iShares Core U.S. Aggregate Bond ETF (AGG)?
The iShares Core U.S. Aggregate Bond ETF (AGG) gives investors exposure to the broad U.S. investment-grade bond market through a single ticker. If you are asking what is AGG ETF, the short answer is that it holds thousands of Treasuries, mortgage-backed securities, and corporate bonds, and aims to track the Bloomberg US Aggregate Bond Index before fees. BlackRock issues it under the iShares brand, and it launched on September 22, 2003, making it one of the oldest and largest bond ETFs. It is structured as an open-end fund. As of October 2026, it held 13,445 bonds with an average credit quality of AA and an average duration of 5.7 years. Many investors use AGG as the core bond position in a diversified portfolio because it combines a 0.03% expense ratio with monthly income and wide coverage of the domestic bond market.
AGG ETF Key Facts
| Item | Detail |
|---|---|
| Full name | iShares Core U.S. Aggregate Bond ETF |
| Ticker | AGG |
| Issuer | BlackRock / iShares |
| Index | Bloomberg US Aggregate Bond Index |
| Inception date | Sep 22, 2003 |
| Expense ratio | 0.03% |
| AUM | $139.4 billion |
| Average volume | ~13.2 million shares/day |
| Yield | 4.16% (12-month trailing); 5.10% (30-day SEC yield, as of Oct 21, 2026) |
| Dividend frequency | Monthly |
| Structure | Open-end fund |
AGG ETF Performance
As of October 2026, AGG has returned -1.87% over the past year, +4.05% annualized over three years, -0.64% annualized over five years, and +1.11% annualized over ten years. The Bloomberg US Aggregate Bond Index posted -1.84%, +4.06%, -0.64%, and +1.14% over the same periods.
| Period | AGG | Benchmark Index | Difference |
|---|---|---|---|
| 1 year | -1.87% | -1.84% | -0.03 pts |
| 3 years (annualized) | +4.05% | +4.06% | -0.01 pts |
| 5 years (annualized) | -0.64% | -0.64% | 0.00 pts |
| 10 years (annualized) | +1.11% | +1.14% | -0.03 pts |
Tracking error stayed small. The fund trailed its index by no more than 0.03 percentage points in any period, which is roughly in line with its 0.03% annual fee. The five-year figure shows how bond funds can post negative multi-year returns after interest rates rise sharply, because falling bond prices can outweigh the interest collected. These numbers describe what happened in specific market conditions, and past performance is not a guarantee of future results.
AGG Top Holdings and Sector Breakdown
AGG is weighted by market value, so issuers with more debt outstanding carry larger weights. The fund spreads its assets across 13,445 holdings, and its ten largest positions made up only about 3.93% of the portfolio. That is very low concentration. All ten are U.S. Treasury notes maturing between 2028 and 2036.
| Top 10 Holdings | Weight |
|---|---|
| US Treasury Note 4.38% (May 15, 2036) | 0.40% |
| US Treasury Note 4.63% (Feb 15, 2035) | 0.40% |
| US Treasury Note 4.25% (Nov 15, 2034) | 0.40% |
| US Treasury Note 4.38% (May 15, 2034) | 0.40% |
| US Treasury Note 4.00% (Feb 28, 2030) | 0.40% |
| US Treasury Note 3.88% (Aug 15, 2034) | 0.39% |
| US Treasury Note 4.25% (May 15, 2035) | 0.39% |
| US Treasury Note 4.13% (Feb 15, 2036) | 0.39% |
| US Treasury Note 4.50% (Nov 15, 2033) | 0.38% |
| US Treasury Note 3.88% (Jul 15, 2028) | 0.38% |
| Sector | Weight |
|---|---|
| US Treasuries | 46.8% |
| Corporate | 24.8% |
| Mortgage-backed (pass-through) | 22.8% |
| Other | 5.7% |
Weights sum to 100.1% because of rounding.
AGG ETF Pros and Cons
Pros
- Very low cost. The 0.03% expense ratio works out to about $3 per year on a $10,000 investment.
- Broad diversification. With 13,445 holdings and a top-10 weight near 3.9%, no single bond drives results.
- High credit quality. An average rating of AA and a 46.8% Treasury weighting limit credit risk compared with corporate-heavy bond funds.
- Scale and liquidity. With $139.4 billion in assets and roughly 13.2 million shares traded daily, AGG has been easy to buy and sell.
- Close index tracking. The fund has stayed within 0.03 percentage points of its benchmark over every period shown.
Cons
- Interest-rate sensitivity. A 5.7-year duration means prices can fall when yields rise, as the -0.64% five-year annualized return shows.
- Narrow scope. The fund focuses on U.S. investment-grade bonds, so it offers little exposure to high-yield, international, or inflation-protected bonds.
- Variable income. The 4.16% trailing yield and 5.10% SEC yield differ, so actual distributions may not match the current yield.
- Market-value weighting. The biggest borrowers, including the U.S. government, receive the largest weights, and the fund does not tilt away from them.
Who Should Invest in AGG?
Is AGG a good investment? That depends on what role bonds play in your portfolio.
AGG may be a good fit if you:
- Want a low-cost core bond holding to pair with stocks
- Prefer high-quality, diversified fixed income over concentrated bets
- Value monthly income and daily liquidity
- Are rebalancing a retirement portfolio toward a more conservative mix
- Prefer a simple, index-based approach without active management
AGG may not be ideal if you:
- Need strong protection from rising rates, since a shorter-duration fund could be more suitable
- Want higher income and are comfortable with high-yield or emerging-market credit risk
- Need explicit inflation protection, such as TIPS
- Expect a bond fund to avoid losses entirely
AGG Alternatives
| ETF | Expense Ratio | AUM | Key Difference |
|---|---|---|---|
| Vanguard Total Bond Market ETF (BND) | 0.03% | ~$389B (all share classes) | Tracks a float-adjusted index; holds more bonds |
| Schwab U.S. Aggregate Bond ETF (SCHZ) | 0.03% | ~$10.6B | Same index as AGG; much smaller |
| iShares Core Total USD Bond Market ETF (IUSB) | 0.06% | ~$28B | Adds high-yield and some emerging-market USD bonds |
BND is AGG’s closest rival. It matches the 0.03% fee, but it follows the Bloomberg U.S. Aggregate Float Adjusted Index and uses sampling.
SCHZ tracks the same index as AGG at the same cost. Its smaller asset base means less trading volume.
IUSB costs slightly more and reaches beyond investment-grade bonds, so it can carry more credit risk.
Related reading: [Best Bond ETFs] | BND ETF Review | SCHZ ETF Review | How to Build an ETF Portfolio
Frequently Asked Questions
Is AGG a good long-term investment?
AGG may suit investors who want a diversified, low-cost bond allocation as a portfolio anchor. Over ten years it has returned +1.11% annualized, and its returns have varied with interest-rate conditions. Whether it fits depends on your goals, time horizon, and risk tolerance.
How often does AGG pay dividends?
AGG pays dividends monthly. The 12-month trailing yield was 4.16%, and the 30-day SEC yield was 5.10% as of October 21, 2026. Monthly amounts can vary.
What is the difference between AGG and BND?
Both charge 0.03% and cover the U.S. investment-grade bond market. AGG tracks the Bloomberg US Aggregate Bond Index. BND tracks a float-adjusted version of that index and holds more individual bonds. Their results have generally been close, so investors often choose based on brokerage availability and personal preference.
Can I lose money investing in AGG?
Yes. AGG returned -1.87% over the past year and -0.64% annualized over five years. Bond prices tend to fall when interest rates rise, and credit or prepayment issues can also affect returns. Holding bonds through a fund does not remove principal risk.
How do interest rates affect AGG?
AGG’s average duration is 5.7 years, which measures its price sensitivity to rate changes. As a rough rule of thumb, a one-percentage-point rise in yields can lower the fund’s price by about 5.7%, all else equal, before interest income. Falling yields have the opposite effect.
Data as of October 2026. Sources: issuer websites and finance.yahoo.com.
Disclaimer: The information in this article is for educational and informational purposes only. It does not constitute financial, investment, or tax advice. Past performance is not indicative of future results. Investing in ETFs involves risk, including possible loss of principal. Always consult a qualified financial advisor before making investment decisions.