TLT vs GOVT: Who Will Win the Battle?LAST UPDATED: April 16, 2023 | By Conrad Golly
Hey there! I’m sure many of you have heard of GOVT and TLT, but do you know the difference between the two?
If you’re like me, you might have some questions about these exchange-traded funds (ETFs) and which one is right for you.
Well, you’re in luck because I’ve done some research and I’m here to share my findings with you.
TLT vs GOVT: First off, let’s start with the basics. GOVT and TLT are both ETFs that invest in U.S. Treasury bonds.
However, they have some key differences that you should be aware of. GOVT is a passively managed fund by iShares that tracks the performance of the Barclays Capital U.S. Treasury Bond Index.
On the other hand, TLT is managed by iShares as well and seeks to track the ICE U.S. Treasury 20+ Year Bond Index. So, while both funds invest in U.S. Treasury bonds, they have different objectives and investment strategies.
Now, you might be wondering which one is better for you.
Well, that depends on your investment goals and risk tolerance. GOVT has provided lower returns than TLT over the past 8 years, but it also has a lower expense ratio.
TLT, on the other hand, has a higher expense ratio but has outperformed GOVT over the past 10 years.
Table of Contents
What is Govt?
As I dive into the world of bond exchange-traded funds (ETFs), I can’t help but wonder what makes Govt different from its competitors.
Govt is an ETF that tracks the performance of the Barclays Capital U.S. Treasury Bond Index. Simply put, it invests in US government bonds.
What sets Govt apart from other bond ETFs is its focus on AAA-rated bonds. AAA-rated bonds are considered to be the safest and most secure bonds in the market.
This means that Govt is a great option for investors who prioritize safety and stability over high returns.
Another thing to note about Govt is its expense ratio. The expense ratio is the annual fee charged by the fund manager to cover the costs of managing the fund.
Govt’s expense ratio is lower than its competitor, TLT, at 0.05% compared to TLT’s 0.15%. This means that Govt is a more cost-effective option for investors.
Govt is a great option for investors who prioritize safety and stability in their investment portfolio.
With its focus on AAA-rated bonds and low expense ratio, it’s a smart choice for those who want to invest in US government bonds.
What is TLT?
When it comes to investing in bonds, TLT is one of the most popular exchange-traded funds (ETFs) available.
TLT stands for iShares 20+ Year Treasury Bond ETF, and it tracks the performance of the Barclays Capital U.S. 20+ Year Treasury Bond Index.
This means that TLT invests in U.S. Treasury bonds that have a maturity of 20 years or more.
As an ETF, TLT can be bought and sold throughout the day on stock exchanges, making it a convenient option for investors who want to trade bonds without having to buy individual bonds themselves.
One of the biggest advantages of investing in TLT is that it offers exposure to U.S. Treasury bonds, which are considered some of the safest investments in the world.
This makes TLT a popular choice for investors who are looking for a safe haven for their money during times of economic uncertainty.
Another advantage of TLT is that it has a relatively low expense ratio of 0.15%, which means that investors don’t have to pay a lot in fees to invest in this ETF.
However, it’s important to keep in mind that TLT is a passively managed fund, which means that it doesn’t try to beat the market by picking individual bonds. Instead, it simply tracks the performance of the underlying index.
Comparison between Govt vs TLT
Price TLT vs GOVT
When it comes to price, GOVT has a lower expense ratio than TLT. GOVT’s expense ratio is 0.05% while TLT’s is 0.15%. This means that GOVT is cheaper to own than TLT.
However, TLT has provided higher returns than GOVT over the past 8 years.
In fact, TLT has outperformed GOVT with an annualized return of 1.15% compared to GOVT’s comparatively lower 0.85% annualized return.
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Risk TLT vs GOVT
Both GOVT and TLT are considered low-risk investments.
However, TLT has a higher exposure to AAA bonds than GOVT.
This means that TLT is more sensitive to changes in interest rates than GOVT. On the other hand, GOVT is mostly comprised of AAA bonds.
This makes GOVT less sensitive to interest rate changes than TLT.
- TLT has a high exposure to AAA bonds
- GOVT is mostly comprised of AAA bonds
Yield TLT vs GOVT
TLT has a higher dividend yield than GOVT. TLT’s dividend yield for the trailing twelve months is around 2.98% while GOVT’s is around 2.07%.
This means that TLT provides a higher income stream than GOVT.
Overall, when it comes to price, risk, and yield, TLT seems to have the edge over GOVT.
However, it’s important to keep in mind that past performance is not indicative of future results.
It’s always a good idea to do your own research and consult with a financial advisor before making any investment decisions.
Bottom Line: GOVT vs TLT
Alright, folks, we’ve reached the end of our journey comparing GOVT and TLT.
It’s time to answer the question that’s been on everyone’s mind: which one should you choose?
Well, it depends on your investment goals and risk tolerance. If you’re looking for a more stable, less volatile option, GOVT might be the way to go.
With a lower standard deviation, it’s slightly less risky than TLT.
On the other hand, if you’re willing to take on more risk for potentially higher returns, TLT might be the better choice.
It has a higher annualized return over the past 10 years and a higher year-to-date return than GOVT. But remember, past performance is not indicative of future results.
It’s important to do your own research and consult with a financial advisor before making any investment decisions.
In terms of fees, both GOVT and TLT have low expense ratios, so you don’t have to worry too much about that.
That’s it for our comparison of GOVT and TLT. I hope you found this article helpful and informative. Happy investing, folks!