The iShares Core U.S. Aggregate Bond ETF (AGG +0.09%) and its municipal counterpart, the iShares National Muni Bond ETF (MUB +0.11%), present a curiously symmetrical dilemma for the discerning investor. One, a broad canvas of American credit; the other, a more sequestered garden of state and local obligations. To merely compare yields, as the financially pedestrian do, is to mistake the scent of the rose for the geometry of its petals. Both offer liquidity—a quality increasingly rare in this age of algorithmic tides—and bear the iShares imprimatur, a brand name that, while lacking the baroque flourish of a bygone era, signifies a certain… competence.
We are, after all, discussing bonds—those quiet, almost apologetic instruments of capital. They lack the swagger of equities, the scandalous allure of derivatives. Yet, within their muted tones lie subtleties that reward the attentive observer. AGG, with its sprawling portfolio, casts a wider net, encompassing everything from Treasury obligations—those ghostly promises of a federal future—to the more corporeal debts of American corporations. MUB, by contrast, confines itself to the realm of municipal finance—the upkeep of schools, the paving of roads, the subtle patronage that greases the wheels of local governance.
A Snapshot in Figures (and Fancies)
| Metric | MUB | AGG |
|---|---|---|
| Issuer | iShares | iShares |
| Expense Ratio | 0.05% | 0.03% |
| 1-yr Return (as of 2026-01-09) | 1.9% | 4.4% |
| Dividend Yield | 3.1% | 3.9% |
| AUM | $42.0 billion | $136.5 billion |
The trailing twelve-month return—a phrase that sounds suspiciously like a detective novel—represents total return.
AGG, with a slightly lower expense ratio, presently offers a more generous payout—a difference of 0.8 percentage points. A seemingly modest sum, perhaps, but one that, compounded over time, can blossom into something rather substantial. Though, of course, substantiality is a relative term, dependent on the observer’s particular scale of values.
Performance and Risk: A Dance of Declines
| Metric | MUB | AGG |
|---|---|---|
| Max Drawdown (5 yr) | -11.88% | -17.83% |
| Growth of $1,000 over 5 years | $922 | $857 |
What Lies Within: A Portfolio’s Anatomy
AGG, a veritable cornucopia of American debt, holds 13,015 positions—a number that, while impressive, feels curiously… bureaucratic. Its portfolio is currently entirely in cash and equivalents—a state of affairs that suggests a certain caution, or perhaps a lack of imagination. It aspires to represent the broadest possible slice of the U.S. bond market—a noble, if somewhat pedestrian, ambition.
MUB, by contrast, is a more focused affair—a curated collection of 6,098 municipal bonds. Its portfolio, too, is presently flush with cash—a testament to the peculiar liquidity of the modern financial system. Its narrower focus may appeal to those seeking tax-advantaged income—or simply a lower correlation with the vagaries of the taxable bond market.
For further elucidation on the art of ETF investing, consult the linked resource—a compendium of wisdom, no doubt, though one suspects it lacks the subtle nuances of a truly discerning analyst.
Implications for the Investor: A Matter of Brackets
Bond ETFs serve as the ballast in most portfolios—generating steady income while equities engage in their characteristic oscillations. Unlike stock ETFs, which purchase shares in companies, bond ETFs acquire debt—essentially IOUs from governments and corporations. AGG and MUB represent two distinct approaches to this income—and the optimal choice depends entirely on your tax bracket—a rather prosaic determinant, perhaps, but a crucial one nonetheless.
AGG’s 3.9% yield is fully taxable—a fact that may induce a sigh of resignation from those in higher tax brackets. MUB’s 3.1% yield, however, is exempt from federal taxes—a significant advantage for those who find themselves contributing generously to the coffers of the state and federal governments. AGG’s fees are marginally lower, and its size dwarfs MUB’s—providing a certain liquidity advantage in a world increasingly prone to unexpected turbulence.
Those in lower tax brackets, or those utilizing tax-advantaged retirement accounts, should gravitate towards AGG—its higher taxable yield providing a more substantial income stream. High earners, however, should explore MUB—where tax savings transform that lower headline yield into a superior after-tax return—a delightful paradox, indeed.
A Glossary of Terms (for the Uninitiated)
ETF: Exchange-traded fund—a basket of securities traded like a stock.
Expense Ratio: Annual fund operating costs, expressed as a percentage of assets.
Dividend Yield: Annual cash distributions, divided by current share price.
1-yr Return: Total return over the trailing twelve months.
Total Return: Investment performance, including price changes and dividends.
Beta: A measure of volatility, relative to a benchmark index.
AUM (Assets Under Management): Total market value of assets managed within a fund.
Max Drawdown: Largest peak-to-trough decline in value.
Investment-Grade Bond: Bond rated as relatively low-risk of default.
Municipal Bond: Bond issued by state or local governments, offering tax-advantaged income.
Core Fixed Income Exposure: Foundational bond holdings for stability and diversification.
Liquidity (of a fund): How easily fund shares can be bought or sold without affecting the price.
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2026-01-24 15:42