Which Is the Better Long-Term Bond ETF: Vanguard's Higher-Yielding VCLT or iShares' Treasury Giant TLT?

The Vanguard Long-Term Corporate Bond ETF (NASDAQ:VCLT) focuses on high-quality corporate debt, while the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) tracks long-term government obligations.

Both funds target the long end of the maturity spectrum, which makes them highly sensitive to interest rate fluctuations. While they share similar duration profiles, the primary distinction lies in credit risk: one relies on corporate balance sheets, while the other is backed by the full faith and credit of the U.S. government. This analysis looks at how those differences impact yield, cost, 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.

Vanguard Long-Term Corporate Bond ETF is the more affordable option with an expense ratio of 0.03%, significantly lower than the 0.15% charged by iShares 20+ Year Treasury Bond ETF. The Vanguard fund also provides a higher payout, reflecting the credit risk premium of corporate bonds.

Performance & risk comparison

What's inside

iShares 20+ Year Treasury Bond ETF focuses on government debt with maturities exceeding 20 years. This fixed income fund holds 48 issues and was launched in 2002. It has paid $3.90 per share over the trailing 12 months, which on its recent ~$83.13 share price works out to a 4.7% yield.

Vanguard Long-Term Corporate Bond ETF targets investment-grade corporate debt with maturities between 10 and 25 years. This fixed-income fund holds 2,745 issues and is highly diversified; no single position exceeds 0.37% of its assets under management (AUM). The fund was launched in 2009. It has paid $4.08 per share over the trailing 12 months, which on its recent ~$72.62 share price works out to a 5.6% yield.

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

Which looks like the better buy

Long-term bond investing has humbled many investors over the past five years. Both VCLT and TLT suffered historic losses during the 2022 rate-hiking cycle, a reminder that owning long-duration bonds is not the risk-free proposition it can appear to be. The question is not just which fund to own, but whether the trade-off between income and safety is being fairly rewarded right now.

The five-year track record favors VCLT on almost every measure. It has delivered stronger total returns than TLT, experienced a smaller maximum drawdown, yields more, and charges a fraction of what TLT costs. Corporate bonds carry credit risk that Treasuries do not, but VCLT's diversification across thousands of investment-grade issuers has historically cushioned that risk more than its critics might expect.

TLT's case rests on two things: its massive scale and its zero credit risk. With roughly five times the assets of VCLT, it offers liquidity that few bond funds can match, making it the preferred vehicle for institutional investors and those who want the purest possible government-backed safe haven. For most long-term buy-and-hold investors, VCLT's lower cost, higher yield, and stronger historical performance make it the more rewarding choice today.

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.