AGG vs SPY: Which ETF Is Better in 2026?
A metric-by-metric comparison of iShares Core U.S. Aggregate Bond ETF (AGG) and State Street SPDR S&P 500 ETF Trust (SPY) — both US Bonds - Broad / US Large Cap Blend funds — using ETFValuer's daily-updated rankings.
Educational content — not financial advice. Data as of July 25, 2026. ~5 minute read.
The Verdict
This is a cross-asset comparison rather than a like-for-like one. AGG is a fixed-income fund and SPY is an equity fund, so they are not competing for the same slot — most portfolios hold some of each. The useful question is not which is better but what mix of the two suits your time horizon and tolerance for drawdowns.
ETFValuer's model scores SPY at 74.7 (Grade B) and AGG at 59.4 (Grade C), but read that gap carefully: the score blends return, risk-adjusted performance, cost and drawdown across a single ranking of all funds, so an asset class with structurally lower expected returns will always score below one with higher returns and higher risk. It is a useful comparison between US Large Cap Blend funds and between US Bonds - Broad funds — not a verdict that one of these two belongs in your portfolio and the other doesn't. Most investors hold both, in a ratio set by how long they have to recover from a bad year.
Head-to-Head: Every Metric
| AGG | SPY | |
|---|---|---|
| Category | US Bonds - Broad | US Large Cap Blend |
| Expense ratio | 0.03% | 0.09% |
| Fund size (AUM) | $138.8B | $781.2B |
| Dividend yield | 2.55% | 0.77% |
| 1-year return | +3.09% | +17.80% |
| 3-year return | +11.69% | +67.54% |
| Volatility | 3.79% | 12.68% |
| Max drawdown | -5.71% | -18.76% |
| Sharpe ratio | -0.50 | 1.01 |
| ETFValuer score | 59.4 | 74.7 |
| Grade | C | B |
| Overall rank | #254 | #53 |
Bold marks the better value in each row. "Better" is directional only (e.g. lower cost, higher return) — it isn't a recommendation by itself. See the full methodology.
Cost
AGG is the cheaper fund, charging 0.03% a year versus 0.09% for SPY — a gap of 0.06 percentage points (about $6.45/year on a $10,000 position) that compounds meaningfully over a multi-decade holding period. Because these funds do different jobs, though, cost alone shouldn't decide it — a cheaper fund that gives you the wrong exposure is a false economy. See the ETF Fee Calculator for the exact dollar impact at your investment size and horizon.
What SPY's Fees Cost You
SPY charges an expense ratio of 0.09% a year, deducted automatically from the fund's value. Small percentages compound into real money — adjust the figures below to see the impact on your own numbers.
Assumes a constant gross return and no additional contributions — a simplification, but it isolates exactly what the expense ratio costs. Try the full fee calculator to model contributions and compare any two funds.
Performance & Risk
Over the trailing 3 years, SPY returned +67.54% versus +11.69% for AGG — a gap of about 55.9 percentage points. On risk, AGG has held up better historically, with a shallower max drawdown (-5.71% vs. -18.76%). SPY currently has the better risk-adjusted return (Sharpe ratio of 1.01 vs. -0.50), meaning it delivered more return per unit of volatility taken on. Comparing these returns directly is misleading, though — a bond fund losing less in a selloff and an equity fund gaining more in a rally are both doing exactly what they were built to do. Judge each against its own role.
How Closely Do They Track Each Other?
Over the last 3.0 years of daily returns (752 shared trading days), AGG and SPY show a very low correlation of 0.206 — essentially unrelated. These funds move largely on their own schedules. Combining them is a real diversification decision rather than a redundant one, which is the case where owning both can genuinely reduce portfolio volatility.
| Measure | Value | What it means |
|---|---|---|
| Daily return correlation | 0.206 | Very low — essentially unrelated |
| R-squared | 4.2% | 4.2% of AGG's daily moves are explained by SPY's |
| Tracking error (annualised) | 15.15% | Typical yearly spread between the two funds' returns |
| Annualised return over 3.0y | AGG +3.78% · SPY +19.12% | SPY ahead by 15.34 points a year |
Correlation alone understates how far these can drift. Across every rolling 12-month window in the period, AGG finished as much as +7.9 points ahead of SPY at the best extreme and -33.5 points at the worst — a 41.4-point spread between the best and worst year of relative performance. Two funds can correlate tightly day to day and still deliver very different outcomes over any single year you happen to hold them.
Calculated from daily total returns over the trailing 3-year window, recomputed every day this site refreshes. Correlation of 1.00 means the two funds moved in lockstep; 0.00 means their daily moves were unrelated.
Which One Should You Pick?
Lean AGG if…
- You want the lower running cost — 0.03% vs 0.09%, about $6 a year less on a $10,000 position
- Current income matters to you — it yields 2.55% against 0.77%
- It has been the calmer ride (3.8% volatility vs 12.7%) with a shallower worst-case fall (-5.7% vs -18.8%)
Lean SPY if…
- You care about return per unit of risk — its Sharpe ratio of 1.01 beats -0.50
- You weight recent results heavily — it returned 67.5% over 3 years against 11.7%
- You want the deeper, more liquid market ($781B in assets vs $139B)
These two are not really substitutes, so "both, in some proportion" is often the right answer rather than picking one. Model the blend with the Portfolio Blender.
Frequently Asked Questions
Is AGG or SPY better?
ETFValuer's model scores SPY at 74.7 (Grade B) and AGG at 59.4 (Grade C), but read that gap carefully: the score blends return, risk-adjusted performance, cost and drawdown across a single ranking of all funds, so an asset class with structurally lower expected returns will always score below one with higher returns and higher risk. It is a useful comparison between US Large Cap Blend funds and between US Bonds - Broad funds — not a verdict that one of these two belongs in your portfolio and the other doesn't. Most investors hold both, in a ratio set by how long they have to recover from a bad year.
Which has the lower expense ratio, AGG or SPY?
AGG currently has the lower expense ratio (0.03% vs. 0.09%).
Can I hold both AGG and SPY?
Yes, and it may be worth doing. AGG and SPY correlate at only 0.21 over the past 3.0 years, so they behave differently enough that holding both is a genuine diversification decision rather than a redundant one. Size each to the role you want it to play.
Go deeper on either fund
Full daily-updated metrics, holdings context, and category peers.