iShares' IGLB or Vanguard's VGLT: Which Long-Term Bond ETF Should Investors Choose?

The iShares 10+ Year Investment Grade Corporate Bond ETF (NYSEMKT:IGLB) focuses on high-quality corporate debt, while the Vanguard Long-Term Treasury ETF (NASDAQ:VGLT) provides exposure to U.S. government bonds.

Fixed-income investors often look to the long end of the maturity spectrum to maximize yield or position for declining interest rates. This analysis compares two popular options that offer exposure to long-dated debt but differ significantly in their credit quality, risk profiles, and historical volatility.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Vanguard fund is slightly more affordable with a 0.03% expense ratio compared to the 0.04% charged by the iShares fund. However, the corporate bond focus of IGLB generates a higher payout for investors, providing a larger income cushion.

Performance & risk comparison

What's inside

As a fixed-income fund, Vanguard Long-Term Treasury ETF focuses primarily on U.S. government bonds. The portfolio contains 102 holdings with an average maturity spanning 10 to 25 years. Its largest positions include various U.S. Treasury notes and bonds, with weights for specific issues including 2.22%, 2.21%, and 2.20% of the total portfolio. This focus on government debt typically provides a high degree of credit safety. It was launched in 2009. Vanguard Long-Term Treasury ETF has paid $2.52 per share over the trailing 12 months, which on its recent ~$53.95 share price works out to a 4.70% yield.

iShares 10+ Year Investment Grade Corporate Bond ETF is also a fixed income vehicle with no equity sector breakdown, focusing instead on high-quality corporate debt denominated in U.S. dollars. It is significantly more diversified than its Treasury counterpart, holding 3,814 securities with maturities exceeding 10 years. Its largest positions are spread across the investment-grade corporate landscape, and the fund is highly diversified, with no single position exceeding 0.29% of the total portfolio. It was launched in 2009. iShares 10+ Year Investment Grade Corporate Bond ETF has paid $2.61 per share over the trailing 12 months, which on its recent ~$48.91 share price works out to a 5.40% yield.

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What this means for investors

Long-term bond investing forces investors to confront an uncomfortable question: Which risk worries you more? The risk that a company struggles to pay its debts, or the risk that interest rates rise and hammer your portfolio?

VGLT holds only U.S. Treasury bonds, meaning zero credit risk. Every payment is backed by the federal government. But that safety comes packaged with extreme sensitivity to interest rate moves. When rates surged from 2022 through 2024, VGLT suffered some of the steepest losses in its history, a painful reminder that government bonds are not risk-free, just credit-risk-free.

IGLB holds thousands of investment-grade corporate bonds from high-quality companies. It yields more than VGLT and has delivered stronger returns over the past decade. But corporate bonds can fall sharply in recessions when investors grow nervous about companies' ability to meet their obligations, a risk VGLT does not carry.

Both fees are negligible, so this really comes down to your risk preference. For investors who want maximum income from long-term high-quality bonds, IGLB is the stronger choice. For those who want the purest government-backed safe haven regardless of yield, VGLT is the more defensive option.

Sara Appino has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.