Switch from AGG to BND

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Topic Author
lkar
Posts: 307
Joined: Sat May 04, 2019 4:02 pm

Switch from AGG to BND

Post by lkar »

When setting my bond allocation I went with AGG instead of BND in my fidelity account mostly due to avoiding commissions for rebalancing.

In ordinary times this seemed like six of one and half a dozen of the other. But now in more turbulent times I like the fact that BND is much more diversified or at least if not diversified holds far more securities.

Given that my choice of AGG was based on a pretty negligible issue and I would have preferred BND from the jump, is there any reason not to switch? I expect that Monday will be a volatile day but it should be reasonably simple to do a sell than buy in succession, or even in small chunks.

Tax deferred account.
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ruralavalon
Posts: 20595
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Switch from AGG to BND

Post by ruralavalon »

lkar wrote: Sun Mar 15, 2020 1:03 pm When setting my bond allocation I went with AGG instead of BND in my fidelity account mostly due to avoiding commissions for rebalancing.

In ordinary times this seemed like six of one and half a dozen of the other. But now in more turbulent times I like the fact that BND is much more diversified or at least if not diversified holds far more securities.

Given that my choice of AGG was based on a pretty negligible issue and I would have preferred BND from the jump, is there any reason not to switch? I expect that Monday will be a volatile day but it should be reasonably simple to do a sell than buy in succession, or even in small chunks.

Tax deferred account.
iShares Core US Aggregate Bond ETF (AGG) ER 0.05%.
Vanguard Total Bond Market ETF (BND) ER 0.35%.
Both are intermediate-term and both have a AA credit rating.

I don't understand why you say that Vanguard Total Bond Market ETF (BND) is "much more diversified". They both have very similar amounts of government bonds, corporate bonds, and securitized instruments.

If they both trade commission free in your account, then I see no important reason to prefer one over the other. I would probably not bother to switch from iShares Core US Aggregate Bond ETF (AGG) to Vanguard Total Bond Market ETF (BND).
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Topic Author
lkar
Posts: 307
Joined: Sat May 04, 2019 4:02 pm

Re: Switch from AGG to BND

Post by lkar »

ruralavalon wrote: Sun Mar 15, 2020 1:21 pm
lkar wrote: Sun Mar 15, 2020 1:03 pm When setting my bond allocation I went with AGG instead of BND in my fidelity account mostly due to avoiding commissions for rebalancing.

In ordinary times this seemed like six of one and half a dozen of the other. But now in more turbulent times I like the fact that BND is much more diversified or at least if not diversified holds far more securities.

Given that my choice of AGG was based on a pretty negligible issue and I would have preferred BND from the jump, is there any reason not to switch? I expect that Monday will be a volatile day but it should be reasonably simple to do a sell than buy in succession, or even in small chunks.

Tax deferred account.
iShares Core US Aggregate Bond ETF (AGG) ER 0.05%.
Vanguard Total Bond Market ETF (BND) ER 0.35%.
Both are intermediate-term and both have a AA credit rating.

I don't understand why you say that Vanguard Total Bond Market ETF (BND) is "much more diversified". They both have very similar amounts of government bonds, corporate bonds, and securitized instruments.

If they both trade commission free in your account, then I see no important reason to prefer one over the other. I would probably not bother to switch from iShares Core US Aggregate Bond ETF (AGG) to Vanguard Total Bond Market ETF (BND).
My understanding, though I certainly could be wrong, is that while proportions of what each hold is very similar, BND is comprised of over 4,000 bonds while AGG has fewer than 10 percent of that amount.

My thought is that greater quantity might lead to greater stability in times of potential credit risk.
stlutz
Posts: 5576
Joined: Fri Jan 02, 2009 1:08 am

Re: Switch from AGG to BND

Post by stlutz »

AGG holds 7635 bonds.

https://www.ishares.com/us/products/239 ... market-etf

BND holds 9183.

https://investor.vanguard.com/etf/profile/BND

AGG does have a somewhat higher weight toward Treasury securities than does BND as they follow slightly different indexes.

I would not change based on these differences.
Topic Author
lkar
Posts: 307
Joined: Sat May 04, 2019 4:02 pm

Re: Switch from AGG to BND

Post by lkar »

Many thanks. I was looking at an article that must have had older and out of date information.
limeyx
Posts: 308
Joined: Wed Sep 07, 2016 5:34 pm

Re: Switch from AGG to BND

Post by limeyx »

ruralavalon wrote: Sun Mar 15, 2020 1:21 pm
lkar wrote: Sun Mar 15, 2020 1:03 pm When setting my bond allocation I went with AGG instead of BND in my fidelity account mostly due to avoiding commissions for rebalancing.

In ordinary times this seemed like six of one and half a dozen of the other. But now in more turbulent times I like the fact that BND is much more diversified or at least if not diversified holds far more securities.

Given that my choice of AGG was based on a pretty negligible issue and I would have preferred BND from the jump, is there any reason not to switch? I expect that Monday will be a volatile day but it should be reasonably simple to do a sell than buy in succession, or even in small chunks.

Tax deferred account.
iShares Core US Aggregate Bond ETF (AGG) ER 0.05%.
Vanguard Total Bond Market ETF (BND) ER 0.35%.
Both are intermediate-term and both have a AA credit rating.

I don't understand why you say that Vanguard Total Bond Market ETF (BND) is "much more diversified". They both have very similar amounts of government bonds, corporate bonds, and securitized instruments.

If they both trade commission free in your account, then I see no important reason to prefer one over the other. I would probably not bother to switch from iShares Core US Aggregate Bond ETF (AGG) to Vanguard Total Bond Market ETF (BND).
Doesn't BND have ER of 0.035% not 0.35% >?
rgs92
Posts: 2842
Joined: Mon Mar 02, 2009 8:00 pm

Re: Switch from AGG to BND

Post by rgs92 »

Yes, BND has about a 3.5-basis-point ER (0.035%), almost nothing basically.
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