BND vs AGG: Best Total Bond Market ETF
BND and AGG are the two giants of total U.S. bond exposure — same role, near-identical cost, slightly different index and holdings count. Here's how to pick between them.
Don't have time? Here's what you need to know:
- 1BND and AGG both deliver broad U.S. investment-grade bond exposure for around 0.03% — they're near-twins.
- 2AGG tracks the Bloomberg U.S. Aggregate; BND tracks the float-adjusted version and holds more bonds.
- 3Their related-but-different indexes make them ideal tax-loss-harvesting partners in taxable accounts.
- 4Neither is risk-free — both fell in 2022 as rates rose, since bond prices move inversely to interest rates.
Two Routes to the Whole U.S. Bond Market
BND (Vanguard Total Bond Market) and AGG (iShares Core U.S. Aggregate Bond) both aim to own the broad U.S. investment-grade bond market: U.S. Treasuries, government-agency mortgage-backed securities, and investment-grade corporate bonds. Both are dollar-denominated, taxable, and exclude high-yield (junk) and most non-U.S. debt. In a portfolio they play the identical role — the stable, ballast side that offsets stock volatility.
Their benchmarks differ slightly. AGG tracks the Bloomberg U.S. Aggregate Bond Index — the long-standing industry standard. BND tracks the Bloomberg U.S. Aggregate Float Adjusted Index, a closely related variant. The float-adjusted version weights bonds by the amount actually available to public investors, which is why BND holds a far larger number of individual securities than AGG, even though the overall risk and return characteristics are nearly the same.
Cost, Holdings, and Duration
On cost they're essentially tied — both BND and AGG charge around 0.03%, among the cheapest bond funds available. The expense ratio won't decide this. Their yields and duration (interest-rate sensitivity) are also very close, typically intermediate-term in the neighborhood of six years, because they hold the same broad mix of the market.
The most visible difference is holdings count: BND's float-adjusted index gives it many thousands of individual bonds, noticeably more than AGG. In practice this granularity doesn't change the experience — both are deeply diversified and track their benchmarks tightly. You should expect their total returns to move almost in lockstep year to year.
| BND | AGG | |
|---|---|---|
| Issuer | Vanguard | iShares (BlackRock) |
| Index | Bloomberg U.S. Agg Float Adjusted | Bloomberg U.S. Aggregate |
| Holds | Treasuries, agency MBS, IG corporates | Treasuries, agency MBS, IG corporates |
| Credit quality | Investment-grade only | Investment-grade only |
| Expense ratio | ~0.03% | ~0.03% |
| Approx. duration | ~6 years | ~6 years |
How to Choose Between Them
Because the funds are so similar, the deciding factors are external. Pick whichever is commission-free at your brokerage and integrates with its auto-invest tools, or whichever issuer's ecosystem you already use — Vanguard for BND, iShares/BlackRock for AGG. If you're building a portfolio mostly from one fund family, matching the bond fund to it keeps things tidy.
There's one nice use for their similarity: because BND and AGG track different (if related) indexes, some investors use them as tax-loss-harvesting partners. If bond prices fall, you can sell one at a loss to capture the tax benefit and immediately buy the other to keep your market exposure, without running afoul of the wash-sale rule. That only matters in taxable accounts, but it's a genuine edge of having two near-equivalent funds.
Tip: BND and AGG make natural tax-loss-harvesting partners in a taxable account: sell one at a loss, buy the other, and stay invested without triggering a wash sale.
Bottom Line
For the overwhelming majority of investors, BND and AGG are interchangeable. Both deliver cheap, broadly diversified, investment-grade U.S. bond exposure as the defensive anchor of a portfolio. Choose on convenience — commission-free status, auto-invest, and issuer ecosystem — and don't lose sleep over the choice.
Just remember what neither fund is: a substitute for cash or a guarantee against loss. Both fell in 2022 when interest rates rose sharply, because bond prices move inversely to rates. They reduce portfolio volatility relative to all-stock holdings, but they carry interest-rate and (modest) credit risk of their own.
Important: Total-bond funds like BND and AGG are not risk-free. When interest rates rise, their prices fall — both posted clear losses in 2022. They cushion a stock portfolio, but they're not a cash equivalent.
Frequently Asked Questions
Is BND or AGG better?
Neither is meaningfully better — they're close twins. BND and AGG both track the broad U.S. investment-grade bond market for about 0.03%, with nearly identical yield and duration. BND tracks a float-adjusted index and holds more individual bonds, but the experience is the same. Choose based on commission-free status and issuer ecosystem at your brokerage.
What's the actual difference between BND and AGG?
Mainly the index. AGG tracks the Bloomberg U.S. Aggregate Bond Index; BND tracks the float-adjusted version, which weights bonds by the amount available to public investors and gives BND a larger number of holdings. Both cover Treasuries, agency MBS, and investment-grade corporates with similar duration around six years, so their returns track closely.
Can I use BND and AGG for tax-loss harvesting?
Yes, and it's a popular tactic. Because they track different (though related) indexes, you can sell one at a loss in a taxable account, immediately buy the other to maintain bond exposure, and avoid the wash-sale rule that would apply if you rebought the identical fund. This only matters in taxable accounts.
Are BND and AGG safe?
They're high-quality but not risk-free. Both hold only investment-grade bonds and are broadly diversified, which keeps credit risk low. However, they carry interest-rate risk: when rates rise, prices fall, and both lost value in 2022. They reduce a portfolio's overall volatility versus stocks but are not cash equivalents or guaranteed against loss.
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Alex Harrington
CFA Level II Candidate, Finance & Economics
Alex Harrington is an independent ETF researcher and personal finance writer with over 8 years of experience analyzing exchange-traded funds. A CFA Level II candidate with a background in economics, Alex has reviewed 800+ ETFs and helped thousands of beginners build their first investment portfolios through clear, jargon-free education.
This content is for educational purposes only and does not constitute financial advice. Past performance does not guarantee future results. Consult a licensed financial advisor before making investment decisions.