The iShares Russell 2000 ETF (IWM) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and TLT is a iShares Long Government fund. So, what’s the difference between IWM and TLT? And which fund is better?
The expense ratio of IWM is 0.04 percentage points higher than TLT’s (0.19% vs. 0.15%). IWM also has a high exposure to the healthcare sector while TLT is mostly comprised of AAA bonds. Overall, IWM has provided higher returns than TLT over the past ten years.
In this article, we’ll compare IWM vs. TLT. We’ll look at performance and risk metrics, as well as at their industry exposure and fund composition. Moreover, I’ll also discuss IWM’s and TLT’s holdings, annual returns, and portfolio growth and examine how these affect their overall returns.
Summary
| IWM | TLT | |
| Name | iShares Russell 2000 ETF | iShares 20+ Year Treasury Bond ETF |
| Category | Small Blend | Long Government |
| Issuer | iShares | iShares |
| AUM | 66.48B | 15.15B |
| Avg. Return | 13.52% | 9.00% |
| Div. Yield | 0.86% | 1.5% |
| Expense Ratio | 0.19% | 0.15% |
The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% 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%.
IWM’s dividend yield is 0.64% lower than that of TLT (0.86% vs. 1.5%). Also, IWM yielded on average 4.53% more per year over the past decade (13.52% vs. 9.00%). The expense ratio of IWM is 0.04 percentage points higher than TLT’s (0.19% vs. 0.15%).
Fund Composition
Holdings
| IWM Holdings | Weight |
| AMC Entertainment Holdings Inc Class A | 0.52% |
| Intellia Therapeutics Inc | 0.33% |
| Crocs Inc | 0.3% |
| BlackRock Cash Funds Treasury SL Agency | 0.29% |
| Tenet Healthcare Corp | 0.26% |
| Lattice Semiconductor Corp | 0.26% |
| Tetra Tech Inc | 0.25% |
| II-VI Inc | 0.25% |
| EastGroup Properties Inc | 0.24% |
| Arrowhead Pharmaceuticals Inc | 0.24% |
IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.
Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.
| 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.
Risk Analysis
| IWM | TLT | |
| Mean Return | 1.12 | 0.63 |
| R-squared | 77.73 | 68.76 |
| Std. Deviation | 18.87 | 12.76 |
| Alpha | -5.12 | -2.83 |
| Beta | 1.23 | 3.54 |
| Sharpe Ratio | 0.68 | 0.55 |
| Treynor Ratio | 9.56 | 1.82 |
The iShares Russell 2000 ETF (IWM) has a Mean Return of 1.12 with a Sharpe Ratio of 0.68 and a Treynor Ratio of 9.56. Its Beta is 1.23 while IWM’s R-squared is 77.73. Furthermore, the fund has a Standard Deviation of 18.87 and a Alpha of -5.12.
The iShares 20+ Year Treasury Bond ETF (TLT) has a Treynor Ratio of 1.82 with a Beta of 3.54 and a R-squared of 68.76. Its Mean Return is 0.63 while TLT’s Standard Deviation is 12.76. Furthermore, the fund has a Alpha of -2.83 and a Sharpe Ratio of 0.55.
IWM’s Mean Return is 0.49 points higher than that of TLT and its R-squared is 8.97 points higher. With a Standard Deviation of 18.87, IWM is slightly more volatile than TLT. The Alpha and Beta of IWM are 2.29 points lower and 2.31 points lower than TLT’s Alpha and Beta.
Performance
Annual Returns
| Year | IWM | TLT |
| 2020 | 19.89% | 17.92% |
| 2019 | 25.42% | 14.93% |
| 2018 | -11.02% | -2.07% |
| 2017 | 14.66% | 8.92% |
| 2016 | 21.36% | 1.36% |
| 2015 | -4.33% | -1.65% |
| 2014 | 4.94% | 27.35% |
| 2013 | 38.85% | -13.91% |
| 2012 | 16.39% | 3.25% |
| 2011 | -4.19% | 33.6% |
| 2010 | 26.76% | 9.25% |
IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% 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
| Fund | Initial Balance | Final Balance | CAGR |
| IWM | $10,000 | $36,686 | 13.52% |
| TLT | $10,000 | $23,809 | 9.00% |
A $10,000 investment in IWM would have resulted in a final balance of $36,686. This is a profit of $26,686 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.52%.
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%.
IWM’s CAGR is 4.53 percentage points higher than that of TLT and as a result, would have yielded $12,877 more on a $10,000 investment. Thus, IWM outperformed TLT by 4.53% annually.
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