iShares Barclays Aggregate Bond Fund ETF (AGG)
The Current Rating for “AGG” is: 1.48%
To find out what this score means, go here
What you need to know
AGG is designed to track the Barclays Capital U.S. Aggregate Bond Index, a high grade bond benchmark with 75% weighting in US Government Bonds, Agency Bonds and AAA rated corporate debt. The Index has a long history as a Lehman Brothers branded product. Barclays Capital acquired many of Lehman’s US investment banking assets in the wake of the Global Financial Crisis. Since this is a bond ETF, it pays interest income to shareholders. At the time of this writing, the ETF pays a monthly distribution equivalent to 2.99% yield (check here for latest distributions).
What’s inside?
The portfolio is primarily composed of US Government and US Agency obligations (39%). The second largest category is AAA rated bonds at (37%). The weighted average maturity of the bonds is 5.9 years and the duration (a measurement of sensitivity to interest rate changes) is 4.23.
When should you buy AGG?
The best time to buy is when one expects 5-10 year interest rates to stay stable or fall further. However, the relatively short maturity of the bonds means that the chances for capital gains are limited when compared to bonds and bond funds with longer maturities. Another reason to buy AGG is to add a non-correlated asset to an equity heavy portfolio. Although a 3% current payout is not electrifying, it might be a better place to park funds than a money market fund if conditions in the other asset markets turn stormy.
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