BOND vs. TLT — ETF comparison tool (2024)

FAQs

How much does a bond yield compare to a TLT? ›

TLT - Performance Comparison. In the year-to-date period, BOND achieves a -0.49% return, which is significantly higher than TLT's -6.35% return. Over the past 10 years, BOND has outperformed TLT with an annualized return of 1.75%, while TLT has yielded a comparatively lower 0.29% annualized return.

For many investors, investing in the right bond funds can be a better option than holding a portfolio of individual bonds. Bond ETFs can provide better diversification — often for a lower cost — can offer higher liquidity, and can be easier to implement.

The Bottom Line. Preferred stock ETFs are more appealing in low-interest rate times thanks to their high yields, but they're not likely to appreciate as much as ETFs tracking common shares during bull markets. Bond ETFs have a reputation for offering greater safety, but it depends on the bond ETF.

An investor can use cumulative interest to calculate a bond's performance by summing the interest paid over a set period. However, there are other more comprehensive methods, such as effective annual yield. Bonds' interest rates, also known as the coupon rate, can be fixed, floating, or only payable at maturity.

If TLT investors are correct, yields will fall back down, and they will be rewarded with potentially significant price gains. If not, and yields remain high, or even go higher, prices may have further to fall.

Hedge Against Recession

If investors believe a recession is coming, they may buy TLT to potentially benefit from the price increase that could accompany falling interest rates. During economic downturns, the Federal Reserve often cuts interest rates aggressively to stimulate the economy.

Bond ETFs can lose value due to several factors, including changes in interest rates, credit risk, and market sentiment. When interest rates rise, the prices of existing bonds, which have lower interest rates compared to new bonds, tend to fall. Since a bond ETF holds many such bonds, its value can decrease as well.

Bond ETFs are affected by changing interest rates, because of the impact on the bonds in their underlying portfolios. When interest rates decrease, bond prices increase, and when interest rates rise, bond prices decline.

Why are bond ETF yields so low? ›

The share prices of exchange-traded funds (ETFs) that invest in bonds typically go lower when interest rates rise. When market interest rates rise, the fixed rate paid by existing bonds becomes less attractive, sinking these bonds' prices.

Generally, bonds have a lower rate of return compared to stocks, so the average annual return would likely be around 3-5%. The average annual return for investing 100% in stocks varies depending on the type of stocks and market conditions. Historically, the average annual return for stocks has been around 8-10%.

Should I only buy bonds when interest rates are high? There are advantages to purchasing bonds after interest rates have risen. Along with generating a larger income stream, such bonds may be subject to less interest rate risk, as there may be a reduced chance of rates moving significantly higher from current levels.

Choosing between a CD and Treasuries depends on how long of a term you want. For terms of one to six months, as well as 10 years, rates are close enough that Treasuries are the better pick. For terms of one to five years, CDs are currently paying more, and it's a large enough difference to give them the edge.

TLT Dividend Information

TLT has a dividend yield of 3.84% and paid $3.51 per share in the past year. The dividend is paid every month and the last ex-dividend date was May 1, 2024.

The bond equivalent yield converts the income from a discounted bond into an annualized rate, which can be combined with the coupon rate to determine the total yield of the bond. The formula to find the BEY is F − P P × 365 d , where: F is the face value of the bond. P is the purchase price of the bond.

No. A Treasury yield is the effective annual interest rate paid by the U.S. government to a bondholder. A Treasury bond is a loan that you make to the government.

For example, a bond trading at $900 with a $1,000 face value and a $60 coupon has a 6% coupon rate and a current yield of 6.7%.