Is a Bond ETF Worth Owning Right Now? Here's My Honest Answer.

It's been a tough year for bond owners. After watching them gain value in 2025 as interest rates fell -- which didn't change the size of the payments from bonds already in investors' hands -- these income investments have lost value this year thanks to re-rising interest rates. The Vanguard Total Bond Market ETF (NASDAQ: BND) and the iShares Core U.S. Aggregate Bond ETF (NYSEMKT: AGG) are both down nearly 5% in 2026 to date, for perspective. That's not catastrophic by stock standards, but for bonds, it's more than a little.

So now what? Is all the damage done, leaving nothing but upside ahead for the foreseeable future? Or should bondholders bail out before things get worse?

The answer is a decisive "It depends," but leaning toward bullishness for certain investors.

The effect of rising interest rates

Whether a particular investment is worth owning at any given time depends on your goals, and what you're willing to give up to reach them. If your goal is generating reliable income for the long haul, then bond ETFs like the aforementioned Vanguard Total Bond Market ETF or the iShares Core U.S. Aggregate Bond ETF still serve this purpose well enough. The former's annualized yield stands at just above 5% right now, while the latter's is just a tad less. The size of their underlying monthly -- yes, monthly -- interest payments isn't going to change much either, even if these tickers' prices do.

Image source: Getty Images.

What if capital preservation rather than income is your goal? That's where things get trickier. We've already seen what even small interest rate increases can do to bonds in the short run. Although higher interest rates are eventually reflected in both of these ETFs' yields, they initially manifest in the form of capital losses.

These setbacks can be surprisingly big given enough time. Not only are AGG and BND both down nearly 5% year to date, but each is down on the order of 20% from 2020's peaks. That's when interest rates hit rock bottom, where they'd stay for the next couple of years with nowhere to go but up from there, no matter when they started moving again.

To this end, rising rates since 2022 have worked against bond prices. Even the interest payments received in the interim wouldn't have offset these losses. That's a long time to wait with nothing to show for your patience.

Most of the risk is in the past now

Here's the thing -- the prior five years have been an incredibly unusual time for interest rates, and therefore for bonds and bond ETFs like the iShares Core U.S. Aggregate Bond ETF and the Vanguard Total Bond Market ETF.

Granted, the period following the subprime mortgage collapse kept interest rates at rock-bottom levels through 2015. The lull from 2020 to 2022, however, is in many ways just an extension of the low-rate backdrop following that 2008 setback. Rates have now cyclically bounced back to long-term norms, where they're apt to remain for the indefinite future.

Ergo, there's no huge threat to bond prices for the foreseeable future, nor to their interest payments. If reliable income or safe capital preservation are your goals, there's nothing wrong with owning a bond ETF at this time, even knowing they might be bumped around a bit.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Total Bond Market ETF. The Motley Fool has a disclosure policy.