Which Long-Term Treasury ETF Is Better, Schwab's SCHQ or the iShares TLT?

The Schwab Long-Term U.S. Treasury ETF (NYSEMKT:SCHQ) and iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) provide similar exposure to long-dated government debt, though the Schwab fund offers a significantly lower cost profile for long-term holders.

Long-term Treasury bonds are essential tools for managing interest rate risk and hedging equity volatility, particularly during periods of market stress. While both funds target maturities of 20 years or more, investors often weigh the massive liquidity of the iShares fund against the rock-bottom pricing found in the Schwab alternative.

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 Schwab fund is more affordable, with an expense ratio that is 0.12 percentage points lower than its iShares counterpart. Additionally, the Schwab fund provides a slightly higher payout, reflected in a yield gap of 0.17 percentage points.

Performance & risk comparison

What's inside

The Schwab Long-Term U.S. Treasury ETF focuses 100% of its holdings on U.S. government bonds with long durations. It holds 100 securities to provide broad exposure to the long end of the yield curve. Its largest positions include Treasury Bond 4.75% 02/15/2056 at 2.20% and Treasury Bond 4.75% 05/15/2055 at 2.20%. It was launched in 2019. The Schwab Long-Term U.S. Treasury ETF has paid $1.47 per share over the trailing 12 months, which on its recent ~$30.21 share price works out to a 4.9% yield.

The iShares 20+ Year Treasury Bond ETF is a fixed income fund that also is comprised of 100% U.S. Treasuries, focusing exclusively on those with maturities exceeding 20 years. It manages a more concentrated portfolio of 48 securities. Its top holdings include Treasury Bond 4.13% 08/15/2053 at 4.68%, Treasury Bond 4.75% 11/15/2053 at 4.55%, and Treasury Bond 4.75% 05/15/2055 at 4.51%. It was launched in 2002. The iShares 20+ Year Treasury Bond ETF has paid $3.90 per share over the trailing 12 months, which on its recent ~$83.17 share price works out to a 4.7% yield.

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What this means for investors

For those seeking the long-term stability and capital preservation afforded by investing in U.S. government debt, the Schwab Long-Term U.S. Treasury ETF (SCHQ) and iShares 20+ Year Treasury Bond ETF (TLT) provide ways to do so. Picking which fund to invest in depends on a handful of factors.

SCHQ’s price per share is lower because the fund performed a three-for-one split in 2024. About 10% of its holdings are in government bonds with maturities between 10 to 15 years, while the remainder are 15 years and beyond, illustrating its attempt to balance rate sensitivity. About 36% of the fund sport maturities of 25 years or more. SCHQ possesses the twin advantage of an ultra-low expense ratio and a higher dividend yield, helping you to keep more money in your pocket. This is a good fund for those who want to buy and hold for the long run.

TLT has a substantially greater expense ratio, lower dividend yield, and larger five-year maximum drawdown. Despite these downsides, TLT’s massive AUM of over $40 billion gives it superior liquidity. Its far higher average trading volume of 24.6 million compared to SCHQ’s ~630,000 demonstrates its popularity among institutional investors. This makes it the better ETF for those who want to do options trading.

Robert Izquierdo 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.