Which U.S. Treasury ETF Is the Better Buy? Here's How VGIT Compares to IEI
Key Points
VGIT and IEI offer nearly identical recent returns and risk profiles, both focusing exclusively on U.S. Treasury bonds.
VGIT charges a much lower expense ratio and yields slightly more.
Both funds provide high liquidity and minimal trading friction, making them accessible options for Treasury bond exposure.
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The Vanguard Intermediate-Term Treasury ETF (NASDAQ:VGIT) and the iShares 3-7 Year Treasury Bond ETF (NASDAQ:IEI) both target U.S. Treasury bonds in the intermediate maturity range.
They are designed to give investors straightforward access to U.S. Treasury bonds with moderate interest rate risk, primarily holding securities maturing in three to 10 years (VGIT) or three to seven years (IEI).
This comparison explores how these two popular funds stack up on cost, returns, risk, and portfolio composition.
Snapshot (cost & size)
| Metric | VGIT | IEI |
|---|---|---|
| Issuer | Vanguard | iShares |
| Expense ratio | 0.03% | 0.15% |
| 1-yr return (as of March 5, 2026) | 1.45% | 1.52% |
| Dividend yield | 3.74% | 3.47% |
| Beta (5Y monthly) | 0.81 | 0.70 |
| AUM | $48.7 billion | $18.5 billion |
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.
VGIT is notably more affordable with its lower expense ratio, which could appeal to cost-conscious investors. VGIT also offers a slightly higher yield, making it more attractive for those seeking income from Treasury exposure.
Performance & risk comparison
| Metric | VGIT | IEI |
|---|---|---|
| Max drawdown (5 y) | -16.05% | -14.60% |
| Growth of $1,000 over 5 years | $886 | $914 |
What's inside
IEI focuses on U.S. Treasury bonds with three to seven years to maturity, holding 82 different securities and providing diversified exposure to intermediate-term Treasuries. The fund has operated for over 19 years, offering a well-established option for those seeking moderate interest rate risk without sector tilts or quirks.
VGIT also invests solely in U.S. Treasury bonds but stretches to a slightly longer maturity window (three to 10 years), with 104 holdings. Like IEI, VGIT avoids sector bias and maintains a pure government bond profile.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Bonds can provide additional security and stability to your portfolio, making these ETFs strong investments when the market is shaky.
VGIT’s longer maturity window increases its risk slightly, as longer-term bonds are more sensitive to changes in interest rates. However, they also tend to offer higher yields, making them more profitable to own.
Another difference between the two funds is the fee structure. VGIT charges an expense ratio of 0.03%, compared to 0.15% for IEI. This means that investors will pay $3 per year in fees for every $10,000 invested in VGIT, or $15 per year for every $10,000 invested in IEI.
This may seem like a marginal difference on the surface, but it can add up to hundreds or even thousands of dollars in fees over time. For long-term investors, higher fees can significantly eat away at your earnings.
Both ETFs can be smart buys for investors seeking additional security. While VGIT carries slightly more risk with its longer maturity window, it also offers a lower expense ratio and a higher yield. IEI is more expensive to own due to fees, but it can offer a bit more stability.
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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.
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