The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. EMB is a iShares Emerging Markets Bond fund and TLT is a iShares Long Government fund. So, what’s the difference between EMB and TLT? And which fund is better?
The expense ratio of EMB is 0.24 percentage points higher than TLT’s (0.39% vs. 0.15%). EMB is mostly comprised of BBB bonds and TLT has a high exposure to AAA bond. Overall, EMB has provided lower returns than TLT over the past 11 years.
In this article, we’ll compare EMB vs. TLT. We’ll look at annual returns and industry exposure, as well as at their fund composition and portfolio growth. Moreover, I’ll also discuss EMB’s and TLT’s performance, risk metrics, and holdings and examine how these affect their overall returns.
|Name||iShares J.P. Morgan USD Emerging Markets Bond ETF||iShares 20+ Year Treasury Bond ETF|
|Category||Emerging Markets Bond||Long Government|
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.
The iShares 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.
EMB’s dividend yield is 2.35% higher than that of TLT (3.85% vs. 1.5%). Also, EMB yielded on average 2.56% less per year over the past decade (6.43% vs. 9.00%). The expense ratio of EMB is 0.24 percentage points higher than TLT’s (0.39% vs. 0.15%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
|EMB Bond Sectors||Weight|
EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.
|TLT Bond Sectors||Weight|
TLT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Sharpe Ratio of 0.55 with a Beta of 1.36 and a Alpha of 0.89. Its R-squared is 23.34 while EMB’s Standard Deviation is 8.44. Furthermore, the fund has a Treynor Ratio of 3.24 and a Mean Return of 0.44.
The iShares 20+ Year Treasury Bond ETF (TLT) has a Treynor Ratio of 1.82 with a Mean Return of 0.63 and a Beta of 3.54. Its R-squared is 68.76 while TLT’s Standard Deviation is 12.76. Furthermore, the fund has a Sharpe Ratio of 0.55 and a Alpha of -2.83.
EMB’s Mean Return is 0.19 points lower than that of TLT and its R-squared is 45.42 points lower. With a Standard Deviation of 8.44, EMB is slightly less volatile than TLT. The Alpha and Beta of EMB are 3.72 points higher and 2.18 points lower than TLT’s Alpha and Beta.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
EMB had its best year in 2012 with an annual return of 17.64%. EMB’s worst year over the past decade yielded -7.42% and occurred in 2013. In most years the iShares J.P. Morgan USD Emerging Markets Bond ETF provided moderate returns such as in 2014, 2011, and 2016 where annual returns amounted to 6.69%, 7.2%, and 9.41% respectively.
The year 2011 was the strongest year for TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in EMB would have resulted in a final balance of $19,295. This is a profit of $9,295 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.43%.
With a $10,000 investment in TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.
EMB’s CAGR is 2.56 percentage points lower than that of TLT and as a result, would have yielded $4,514 less on a $10,000 investment. Thus, EMB performed worse than TLT by 2.56% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.