Best ETFs: Long-term Bonds

ETFS

Updated rankings are out. Go to Best ETFs 2017: Long-term Bonds.

In this category the iShares ETF family lands in the top spot for cost efficiency, with its 7-10 Year Treasury Bond fund (IEF), and in the lead for assets, with iBoxx $ Investment Grade Corporate Bond (LQD).

Long bonds offer some prospect of real returns; coupons of 3% to 4% are comfortably ahead of present inflation. They come with risks, though.

All of them would suffer principal losses if interest rates rose. Some of them (the ones with “corporate” or “credit” in the name) would suffer in a recession that creates a fear of defaults.

If you are confident that rates will not rise, go way out on the maturity spectrum with Vanguard Extended Duration (EDV). This fund did well in 2014, when rates declined. It’s not doing well in 2015.

Another long-maturity product is the Pimco 25+ Year Zero Coupon U.S. Treasury fund (ZROZ). Typical of this fund family, it’s not particularly cheap.

Rules for the Best ETFs scorecard, and links to 13 categories of funds, can be found here.

Ticker Fund Assets ($ mil)1 Expense ratio (%) 10-year cost2
IEF iShares 7-10 Year Treasury Bond 6,237 0.15 184
BLV Vanguard Long-Term Bond 1,158 0.1 185
TLH iShares 10-20 Year Treasury Bond 392 0.15 191
TLT iShares 20+ Year Treasury Bond 5,133 0.15 195
TLO SPDR Barclays Long Term Treasury 169 0.1 202
VCLT Vanguard Long-Term Corporate Bond 962 0.12 216
EDV Vanguard Extended Duration Treasury 363 0.12 222
ILTB iShares Core 10+ Year USD Bond 126 0.12 225
VGLT Vanguard Long-Term Government Bond 233 0.12 243
LQD iShares iBoxx $ Invst Grade Crp Bond 21,735 0.15 244
LWC SPDR Barclays Long Term Corp Bd 270 0.12 272
ZROZ Pimco 25+ Year Zero Coupon US Trs 152 0.15 313
IBCC iShares iBonds Mar 2018 Corp ex-Fincls 173 0.1 326
IBDD iShares iBonds Mar 2023 Corporate 62 0.1 333
CLY iShares 10+ Year Credit Bond 771 0.2 355
CORP Pimco Investment Grade Corporate Bd 235 0.2 357
PLW PowerShares 1-30 Laddered Treasury 281 0.25 422
BAB PowerShares Build America Bond 667 0.27 480
PFXF Market Vectors Pref Secs exFincls 285 0.4 679
BABS SPDR Nuveen Barclays Build Amer Bd 54 0.35 715
1: July 28, 2015. 2: Cost of holding $10,000 for a decade; assumes 5% growth.
Sources: Morningstar, Bloomberg, fund distributors, Forbes

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