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Proprietary Data Insights Financial Pros Taxable Bond ETFs Searches in the Last Month
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Treasury ETFs saw record inflows of $90 billion in the first three quarters of 2022. That’s pretty impressive given the lackluster performance for the year. As concerns about inflation wane and a recession takes the lead, more investors are moving from mutual funds to fixed-income ETFs. One of those is the iShares Core U.S. Aggregate Bond ETF (AGG), which is suddenly surging in interest from financial pros, according to the latest search data from Trackstar, our proprietary sentiment indicator. Financial pros may be looking into it to smooth out volatility in their portfolios. Or they believe after last year’s sell-off, valuations are attractive. After a 16% loss in 2022, AGG rebounded strongly this month. Is now a good time to add it to your portfolio? iShares Core U.S. Aggregate Bond ETF The iShares Core U.S. Aggregate Bond ETF seeks to track the investment results of an index of the total U.S. investment-grade bond market. It offers investors a low-cost way to diversify a portfolio using fixed income. In addition, it gives them broad exposure to U.S. investment-grade bonds. Key Facts About AGG
The top 10 assets in the portfolio make up 9.7% of its weight: Source: BlackRock There are over 10,000 positions in the portfolio, but 41.1% are from the U.S. Treasury, followed by 14.0% from the Federal National Mortgage Association. Source: BlackRock Nearly 92% of the fund’s exposure is to the Treasury, mortgage-backed securities pass-through, industrial, and financial institutions. Source: BlackRock Performance Over the last five years, AGG has had a cumulative return of -0.2%, including dividends. But since it started trading in 2003, it has returned 75.2%. Source: BlackRock Trading & Investing in AGG AGG trades an average daily stock volume of 8.2 million shares. Options trading is also available for those who prefer derivatives. The ETF distributes a monthly dividend, currently yielding 2.43%. Competition Investors seeking fixed income via ETFs have several options to choose from. Some of the more notable ones include the Vanguard Total Bond Market ETF (BND), Schwab U.S. Aggregate Bond ETF (SCHZ), SPDR Portfolio Aggregate Bond ETF (SPAB), and Vanguard Total International Bond ETF (BNDX). Holdings & Top 10 Weighting
BNDX has fewer holdings, but its top ones are less concentrated than AGG’s, BND’s, and SPAB’s. Meanwhile, AGG has the second-highest number of positions, but the most concentrated top 10. Fees
AGG charges a net expense ratio of 0.03%, which is in line with other bond funds. Dividend
SCHZ offers the most attractive yield at 2.7%, followed by SPAB at 2.5%, AGG at 2.4%, and BND at 2.4%. 10-Year Performance
None of the ETFs above have had positive returns over the last five years, not including dividends. But once you factor in dividends, they’ve all posted modest gains.
Our Opinion 8/10 AGG is the best proxy for the U.S. bond market. It includes Treasurys and investment-grade corporate debt. Last year’s dismal returns could be the buying opportunity for which fixed-income investors have been waiting. We believe AGG will bounce back in 2023. It deserves a small allocation in most portfolios and is an excellent tool for smoothing out portfolio risk and creating income. |
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