IEI Offers Lower Costs and Higher Scale Than FIGB

The iShares 3-7 Year Treasury Bond ETF (NASDAQ:IEI) and the Fidelity Investment Grade Bond ETF (NYSEMKT:FIGB) differ most in cost, yield, and risk: IEI is more affordable and larger, while FIGB pays a higher yield but has seen sharper downturns.

IEI aims to track the performance of U.S. Treasury bonds with maturities of 3 to 7 years, offering a pure-play on government debt. FIGB, in contrast, provides exposure to a broader set of U.S. investment-grade bonds, including corporates, for investors seeking diversification beyond Treasuries. This comparison looks at cost, performance, risk, and what is inside each fund.

Snapshot (cost & size)

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

IEI is more affordable with a 0.15% expense ratio, compared to FIGB’s 0.36%. While FIGB offers a higher dividend yield at 4.1%, IEI’s lower cost and higher assets under management (AUM) may appeal to cost-conscious investors or those seeking greater liquidity.

Performance & risk comparison

What's inside

FIGB is designed to provide diversified exposure to U.S. investment-grade bonds, with 653 holdings as of Jan. 30, 2026. With nearly five years on the market, its top holdings include U.S. Treasury Notes 4.25% and other similar securities. Almost half, or 45%, of its portfolio is comprised of government bonds, with 23% invested in securitized bonds, and 22% in corporate bonds. This mix reflects its focus on holding high-quality securities across the bond market.

IEI, in contrast, invests solely in U.S. Treasury securities, with 85 holdings and no corporate credit exposure. Its top allocations are to Treasury Note 11/30/2030 4.38%, Treasury Note 02/15/2029 2.63%, and Treasury Note 05/15/2029 2.38%, reflecting a pure government bond approach. Neither fund has unique structural quirks or uses leverage, and both are currently 100% allocated to cash and equivalents.

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What this means for investors

IEI and FIGB are two quality bond funds to consider in 2026. Investors may be interested in choosing a quality bond fund now, given the potential for falling interest rates. This prospect is more likely following the Federal Reserve’s two rate cuts last year.

While FIGB offers a higher dividend yield, this advantage is partially offset by its higher expense ratio. By contrast, IEI’s expense ratio is 0.21 percentage points lower than FIGB, which partly offsets the 0.60% yield difference between these ETFs.

It’s also noteworthy that IEI delivered a higher total return over the last four years with lower volatility than FIGB. This reflects IEI’s focus on investing in U.S. government bonds, while FIGB’s higher beta appears to stem from its allocation to non-government bonds.

Facing the prospect of one or two more rate cuts this year, an investment in pure treasuries offers reliable, safe income. IEI is for investors seeking the best combination of high yield, stability, and low cost, while FIGB makes sense for investors who want to maximize their near-term yield.

John Ballard 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.