Treasury Lockdown or Income Adventure? Here's What Sets IEI and FBND Apart.

Fidelity Total Bond ETF (NYSEMKT:FBND) delivers a higher yield and broader sector exposure than iShares 3-7 Year Treasury Bond ETF (NASDAQ:IEI), but trades at a higher annual cost and has shown greater historical risk.

Both FBND and IEI are fixed income exchange-traded funds aimed at investors seeking stability and income, but their approaches are notably different. This comparison looks at cost, yield, risk, performance, and portfolio construction to help investors decide which ETF may align better with their needs.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

IEI is more affordable on an annual basis, with a 0.15% expense ratio compared to FBND’s 0.36%. FBND, however, delivers a higher payout, offering a 4.6% dividend yield versus IEI’s 3.5%.

Performance & risk comparison

What's inside

FBND spans over 4,400 holdings and has been around for over 11 years, targeting a broad bond universe. The fund builds a foundation of U.S. Treasuries, investment-grade corporate bonds, and mortgage-backed securities, then layers in targeted allocations to higher-yielding debt including up to 20% in high-yield corporate bonds and emerging market debt. Top positions include bonds from major financial institutions like Bank of America, JPMorgan Chase, and Goldman Sachs, each making up less than 1% of assets.

IEI, in contrast, focuses solely on U.S. Treasury bonds with maturities between three and seven years. Its holdings are entirely in the cash & others category, and its largest positions are specific Treasury notes. IEI avoids corporate and sector risks, sticking exclusively to government-backed debt.

For more guidance on ETF investing, check out the full guide at this link.

What this means for investors

When shopping for bond ETFs, your first big decision is simple: Stick with rock-solid government debt, or chase higher income from a diversified mix?

IEI exclusively holds U.S. Treasury bonds maturing in 3-7 years, meaning zero corporate debt and zero high-yield exposure. FBND does much more: It builds a foundation of Treasuries, investment-grade corporate bonds, and mortgage-backed securities, then layers in targeted allocations to higher-yielding debt including up to 20% in high-yield corporate bonds and emerging market debt. That focused approach pays a 4.6% yield versus IEI's 3.5%, meaning you'd collect roughly $110 more per year in interest on every $10,000 invested.

IEI charges just 0.15% annually and delivers pure government backing, so you can sleep well at night with this bond ETF in your portfolio. FBND charges 0.36% for active management across 4,400+ holdings, betting Fidelity's bond team can deliver higher returns through strategic choices.

Conservative investors wanting absolute government safety and recession resilience should choose IEI. Income-focused investors comfortable with moderate corporate credit risk for a meaningfully higher yield would be better served by FBND.

Glossary

ETF (Exchange-Traded Fund): A pooled investment fund that trades on an exchange like a stock.
Fixed income: Investments, such as bonds, that pay regular interest and return principal at maturity.
Expense ratio: Annual fund operating costs expressed as a percentage of the fund’s average assets.
Dividend yield: Annual cash distributions from a fund divided by its current market price.
Beta: A measure of an investment’s volatility compared with a benchmark, often the S&P 500 index.
Max drawdown: The largest peak-to-trough decline in an investment’s value over a specific period.
Total return: Investment performance including price changes plus all interest and dividends, assuming reinvestment.
Holdings: The individual securities, such as bonds or stocks, that a fund owns.
Sector exposure: The proportion of a fund invested in specific industries, like energy or financials.
Credit exposure: The degree to which a portfolio is affected by borrowers’ ability to repay their debts.
U.S. Treasury bonds/notes: Debt securities issued by the U.S. government to finance operations, considered low credit risk.
AUM (Assets Under Management): The total market value of all assets a fund or manager oversees.

JPMorgan Chase is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and JPMorgan Chase. The Motley Fool has a disclosure policy.