VGLT vs. SCHQ: Which U.S. Treasury ETF Is a Better Choice for Investors?

The Schwab Long-Term U.S. Treasury ETF (NYSEMKT:SCHQ) and the Vanguard Long-Term Treasury ETF (NASDAQ:VGLT) both offer exposure to long-dated U.S. Treasury bonds, but they differ primarily in fund size and dividend yield.

Both funds aim to give investors exposure to long-dated U.S. Treasury bonds, offering similar risk profiles and return prospects. This comparison examines their costs, returns, and portfolio construction to help investors decide which option may be more appealing.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

Both funds are equally affordable with a low 0.03% expense ratio, but SCHQ offers a marginally higher yield. For investors focused on minimizing costs, there is no meaningful difference here. The yield gap is negligible, but it could have a greater impact on long-term investors with significant account balances.

Performance & risk comparison

What's inside

VGLT holds 94 bonds, and it invests primarily in U.S. Treasury bonds with maturities between 10 and 25 years. Its weighted average maturity is 22 years, with an average duration of 14 years.

SCHQ contains 97 holdings, focused on U.S. Treasury securities with maturities of more than 10 years. Like VGLT, its average maturity is 22 years with an average duration of 14 years, and it closely mirrors VGLT in terms of sector and holding composition.

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

Foolish take

VGLT and SCHQ are both solid choices for investors looking to gain exposure to long-term U.S. Treasury bonds. The two ETFs offer identical expense ratios and very similar dividend yields, so fee-conscious and income-focused investors may not notice a meaningful difference between them.

VGLT's significantly higher AUM can be an advantage for investors seeking greater liquidity, as a larger asset base can make it easier to buy and sell. This may not matter as much for long-term investors who don't plan on selling anytime soon, but as one of the only factors distinguishing these very similar ETFs, it's something to consider.

Despite being a newer and smaller ETF, SCHQ is still highly competitive. It's earned similar returns to VGLT over the last one and five years, and it can be a good choice for investors looking to diversify ETF providers.

Glossary

Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.
Dividend yield: Annual income from dividends as a percentage of the fund’s current price.
Beta: A measure of a fund’s volatility relative to the overall market, typically the S&P 500.
AUM (Assets Under Management): The total market value of assets a fund manages on behalf of investors.
Max drawdown: The largest percentage drop from a fund’s peak value to its lowest point over a period.
Growth of $1,000 over 5 years: How much a $1,000 investment would have increased or decreased over five years.
Holdings: The individual securities or assets owned within a fund or portfolio.
Sector tilt: The degree to which a fund is concentrated in a particular industry sector.

Katie Brockman 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.