Understanding the iShares Core U.S. Aggregate Bond ETF (AGG)

What this ETF is trying to do

The iShares Core U.S. Aggregate Bond ETF, known by its ticker symbol AGG, is an exchange-traded fund (ETF) that focuses on U.S. bonds. While the specific holdings are not listed in this report, bond ETFs generally aim to provide exposure to a wide variety of debt securities.

What the numbers show

When looking at an ETF, it is important to understand two different types of returns: price return and total return.

• Price Return: This measures only the change in the share price. For AGG, the one-year price return was approximately -6.02%. The year-to-date (YTD) price return was approximately -5.64%.

• Total Return: This is a more complete picture because it includes the value of distributions (cash payments) made to investors. The one-year total return was approximately -2.17%, and the YTD total return was approximately -2.73%.

You can see that the total return is higher than the price return. This happens because the cash distributions help offset some of the share-price decline. Looking further back, the three-year total return was approximately 13.54%.

To visualize the price change, if you had bought one share at the estimated price from roughly one year ago ($100.29), the current price would be $94.25.

Income and distribution explanation

Some investors look for ETFs that pay regular cash. AGG has a distribution yield of approximately 4.21%. This means the fund paid out about $3.97 in trailing distributions per share. These payments usually happen monthly, with Monday being the most common day for a distribution to occur.

It is important to remember that a high distribution yield is not the same thing as total return. While distributions provide cash income, they do not guarantee that your original investment will stay the same value.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund declines. StockValueFinder uses an "erosion-risk score" to measure this risk. AGG has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk and does not mean the fund's value has definitely collapsed. There is no severe erosion-risk flag for this ETF.

Pros

• The fund provides regular monthly distributions.

• The total return figures are higher than the price-only return figures, showing the impact of cash payments.

Cons

• The ETF has experienced recent share-price declines (negative price returns) over the last year and year-to-date.

• The erosion-risk score indicates mild price erosion.

Beginner takeaway

When studying AGG, remember the difference between share price and total return. While the share price has gone down recently, the cash distributions help improve the overall total return. Always look at both numbers to get a full picture of how an ETF is performing.