IWD vs. TLT: What’s The Difference?

The iShares Russell 1000 Value ETF (IWD) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. IWD is a iShares Large Value fund and TLT is a iShares Long Government fund. So, what’s the difference between IWD and TLT? And which fund is better?

The expense ratio of IWD is 0.04 percentage points higher than TLT’s (0.19% vs. 0.15%). IWD also has a high exposure to the financial services sector while TLT is mostly comprised of AAA bonds. Overall, IWD has provided higher returns than TLT over the past ten years.

In this article, we’ll compare IWD vs. TLT. We’ll look at fund composition and holdings, as well as at their annual returns and risk metrics. Moreover, I’ll also discuss IWD’s and TLT’s portfolio growth, performance, and industry exposure and examine how these affect their overall returns.

Summary

IWD TLT
Name iShares Russell 1000 Value ETF iShares 20+ Year Treasury Bond ETF
Category Large Value Long Government
Issuer iShares iShares
AUM 54.1B 15.15B
Avg. Return 11.40% 9.00%
Div. Yield 1.57% 1.5%
Expense Ratio 0.19% 0.15%

The iShares Russell 1000 Value ETF (IWD) is a Large Value fund that is issued by iShares. It currently has 54.1B total assets under management and has yielded an average annual return of 11.40% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.19%.

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%.

IWD’s dividend yield is 0.07% higher than that of TLT (1.57% vs. 1.5%). Also, IWD yielded on average 2.40% more per year over the past decade (11.40% vs. 9.00%). The expense ratio of IWD is 0.04 percentage points higher than TLT’s (0.19% 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).

Fund Composition

Holdings

IWD - Holdings

IWD Holdings Weight
Berkshire Hathaway Inc Class B 2.58%
JPMorgan Chase & Co 2.25%
Johnson & Johnson 2.24%
UnitedHealth Group Inc 1.78%
Procter & Gamble Co 1.71%
The Walt Disney Co 1.5%
Bank of America Corp 1.43%
Comcast Corp Class A 1.33%
Exxon Mobil Corp 1.2%
Pfizer Inc 1.18%

IWD’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.58%, 2.25%, 2.24%, 1.78%, and 1.71%.

The Walt Disney Co (1.5%), Bank of America Corp (1.43%), and Comcast Corp Class A (1.33%) have a slightly smaller but still significant weight. Exxon Mobil Corp and Pfizer Inc are also represented in the IWD’s holdings at 1.2% and 1.18%.

TLT - Holdings

TLT Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

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).

Risk Analysis

IWD TLT
Mean Return 1.03 0.63
R-squared 92.38 68.76
Std. Deviation 14.35 12.76
Alpha -3.23 -2.83
Beta 1.02 3.54
Sharpe Ratio 0.81 0.55
Treynor Ratio 11.06 1.82

The iShares Russell 1000 Value ETF (IWD) has a Mean Return of 1.03 with a Standard Deviation of 14.35 and a R-squared of 92.38. Its Treynor Ratio is 11.06 while IWD’s Sharpe Ratio is 0.81. Furthermore, the fund has a Beta of 1.02 and a Alpha of -3.23.

The iShares 20+ Year Treasury Bond ETF (TLT) has a Beta of 3.54 with a Sharpe Ratio of 0.55 and a Standard Deviation of 12.76. Its R-squared is 68.76 while TLT’s Alpha is -2.83. Furthermore, the fund has a Mean Return of 0.63 and a Treynor Ratio of 1.82.

IWD’s Mean Return is 0.40 points higher than that of TLT and its R-squared is 23.62 points higher. With a Standard Deviation of 14.35, IWD is slightly more volatile than TLT. The Alpha and Beta of IWD are 0.40 points lower and 2.52 points lower than TLT’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

IWD vs. TLT - Annual Returns

Year IWD TLT
2020 2.67% 17.92%
2019 26.34% 14.93%
2018 -8.4% -2.07%
2017 13.47% 8.92%
2016 17.09% 1.36%
2015 -3.95% -1.65%
2014 13.21% 27.35%
2013 32.18% -13.91%
2012 17.28% 3.25%
2011 0.21% 33.6%
2010 15.3% 9.25%

IWD had its best year in 2013 with an annual return of 32.18%. IWD’s worst year over the past decade yielded -8.4% and occurred in 2018. In most years the iShares Russell 1000 Value ETF provided moderate returns such as in 2014, 2017, and 2010 where annual returns amounted to 13.21%, 13.47%, and 15.3% 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.

Portfolio Growth

IWD vs. TLT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWD $10,000 $30,746 11.40%
TLT $10,000 $23,809 9.00%

A $10,000 investment in IWD would have resulted in a final balance of $30,746. This is a profit of $20,746 over 11 years and amounts to a compound annual growth rate (CAGR) of 11.40%.

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%.

IWD’s CAGR is 2.40 percentage points higher than that of TLT and as a result, would have yielded $6,937 more on a $10,000 investment. Thus, IWD outperformed TLT by 2.40% annually.


Current recommendations:

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) 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!

2) 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!).

3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply