iShares Core Total USD Bond Market ETF: A Comprehensive Guide

The iShares Core Total USD Bond Market ETF (NYSEARCA: AGG) is a highly diversified ETF that provides exposure to the entire U.S. dollar investment-grade bond market. With over $250 billion in assets under management, AGG is one of the largest and most popular bond ETFs in the world.

Key Features of AGG

• Comprehensive exposure: AGG tracks the Bloomberg Barclays U.S. Aggregate Bond Index, which includes over 8,000 investment-grade bonds from government, corporate, and securitized issuers. This broad diversification reduces risk and provides exposure to a wide range of maturities and sectors.
• Low cost: AGG has an annual expense ratio of only 0.05%, making it one of the most cost-effective ways to gain broad exposure to the bond market.
• High liquidity: AGG is traded on the NYSE Arca, one of the most active stock exchanges in the world. This high liquidity makes it easy to buy and sell shares of AGG, ensuring that investors can access their money when they need it.

Performance of AGG

Since its inception in 2003, AGG has generated a cumulative return of over 80%. The fund has outperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, over the majority of this period.

In recent years, low interest rates have boosted the performance of AGG. However, as interest rates rise, the fund's return could decline. It is important to note that bonds are inversely correlated to interest rates, so when interest rates rise, bond prices fall.

Risk Considerations

While AGG is a diversified ETF, it is not immune to risk. The fund is exposed to a variety of risks, including:

• Interest rate risk: As mentioned above, bonds are inversely correlated to interest rates, so rising interest rates could lead to losses for AGG.
• Credit risk: AGG includes bonds from a variety of issuers, some of which may have lower credit ratings. If these issuers default on their obligations, AGG could lose value.
• Market risk: AGG is subject to the overall market environment. If the stock market declines, AGG could also decline, even if interest rates remain stable.

Who Should Invest in AGG?

AGG is a suitable investment for a variety of investors, including:

• Investors who want broad exposure to the U.S. bond market.
• Investors who have a long time horizon and are not concerned with short-term fluctuations in interest rates.
• Investors who are looking for a relatively low-cost way to invest in bonds.

How to Buy AGG

AGG can be purchased through most online brokers. When buying AGG, it is important to consider the following factors:

• The expense ratio: AGG's expense ratio is only 0.05%, but other bond ETFs may have lower or higher expense ratios.
• The liquidity: AGG is a highly liquid ETF, but other bond ETFs may have lower liquidity, which can make it more difficult to buy and sell shares.
• The investment horizon: AGG is a suitable investment for long-term investors, but other bond ETFs may be more suitable for short-term investors.

Conclusion

The iShares Core Total USD Bond Market ETF is a highly diversified, low-cost, and liquid ETF that provides exposure to the entire U.S. dollar investment-grade bond market. The fund is a suitable investment for a variety of investors, including those who are looking for broad exposure to the bond market, have a long time horizon, and are not concerned with short-term fluctuations in interest rates.

Frequently Asked Questions

1. What is the difference between AGG and other bond ETFs?

AGG is a broad market bond ETF that tracks the Bloomberg Barclays U.S. Aggregate Bond Index. Other bond ETFs may track different indices or have different investment objectives. For example, some bond ETFs may focus on specific sectors, such as corporate bonds or government bonds.

2. Is AGG a good investment?

AGG is a suitable investment for a variety of investors, including those who are looking for broad exposure to the bond market, have a long time horizon, and are not concerned with short-term fluctuations in interest rates. However, it is important to note that AGG is exposed to a variety of risks, including interest rate risk, credit risk, and market risk.

3. How much does it cost to invest in AGG?

AGG has an annual expense ratio of 0.05%. This means that for every $10,000 invested in AGG, you will pay $5 in fees each year.

4. Where can I buy AGG?

AGG can be purchased through most online brokers.

Tables

Table 1: AGG vs. Other Bond ETFs

Table 2: AGG Performance Summary

Table 3: AGG Risk Exposures

Table 4: AGG Holdings Sector Breakdown

Interesting New Applications

• AGG as a hedge against inflation: While bonds are generally inversely correlated to inflation, long-term bonds, such as those held by AGG, can provide some protection against inflation. This is because long-term