VGLT vs. TLT: Which Treasury Bond ETF Is the Better Buy?
Written by Andy Gould for The Motley Fool -> Vanguard Long-Term Treasury ETF (VGLT) offers a significantly lower expense ratio than iShares 20+ Year Treasury Bond ETF (TLT) while maintaining a near-identical dividend yield. TLT focuses exclusively on Treasury securities with ma
Vanguard Long-Term Treasury ETF (VGLT) offers a significantly lower expense ratio than iShares 20+ Year Treasury Bond ETF (TLT) while maintaining a near-identical dividend yield.
TLT focuses exclusively on Treasury securities with maturities over 20 years.
VGLT has delivered a higher total return over the last 12 months and experienced a less severe five-year maximum drawdown than TLT.
The Vanguard Long-Term Treasury ETF (NASDAQ:VGLT) carries a significantly lower expense ratio than the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) for investors seeking exposure to long-dated government debt.
These two funds are staples for fixed-income investors looking to hedge against stock market volatility or take advantage of falling interest rates. While both focus on the long end of the U.S. Treasury curve, subtle differences in cost and the specific maturity ranges of the underlying bonds could meaningfully impact long-term portfolio results for income-focused investors.
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
VGLT is notably cheaper, with an expense ratio of 0.03% compared to TLT’s 0.15%. Despite this cost gap, both funds provide a nearly-identical divided yield of roughly 4.6%.
VGLT is a fixed income fund that tracks the Bloomberg U.S. Long Treasury Index -- which holds Treasuries with maturities of 10+ years. The fund, which was launched in 2009, manages 99 holdings and pays a roughly 4.6% dividend yield. Its primary goal is providing steady income by maintaining a dollar-weighted average maturity of 10 to 25 years. The fund has an average effective maturity of 21.8 years -- meaning the bonds it holds are expected to be fully repaid, on average, in that time frame. The fund’s average duration -- a measure of how sensitive the fund's price is to changes in interest rates -- is 13.8 years (a longer duration means bigger price swings when rates move).
