Just Another Low-Risk Bond Fund

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

This week’s ETF Talk addresses another bond-focused exchange-traded fund (ETF), iShares Core U.S. Aggregate Bond ETF (AGG). This fund provides an additional way for investors to pursue stability and income. Compared to last week’s featured fund, Vanguard Total Bond Market ETF (BND), AGG has a larger focus on mortgage-backed government securities.

AGG certainly is a good source of investment-grade U.S. bonds. It is fairly low cost, as well as safer than most investments on the market. With interest rates low and unlikely to rise anytime soon, bonds are in vogue.

So far this year, AGG is up a slight 0.67%. Even though bonds are generally an income-focused investment, their prices still can rise and often do based on interest rate changes, investor demand and the interaction between those two factors.

The net expense ratio for this fund is a tiny 0.08%. iShares manages $24.2 billion in this fund. Perhaps the most appealing aspect of AGG right now is its reliable dividend yield, which currently stands at 2.25%.


As expected, the largest area of investment for this fund is in U.S. Treasury bonds, with 38.01%. This weighting is followed by a variety of different mortgage-backed securities totaling 29.98% of AGG’s holdings. One difference between this bond fund and some others is that it has a fair share of holdings (around 15%) in cash and cash equivalents, making it a bit more stable while easing up on its bond exposure to reduce risk.

Risk also typically is smaller when investing in bond funds than when plunging into equities. As a result, your personal preferences and risk tolerance should be considered. If bond investing appeals to you, and I think it should, then iShares Core U.S. Aggregate Bond ETF (AGG) could be an attractive choice.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

Exclusive  Revisiting Bear Market Realities  

In case you missed it, I encourage you to read my e-letter column from last week about a different bond-focused ETF. I also invite you to comment in the space provided below.

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