MBB vs. TLT: What’s The Difference?

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

The expense ratio of MBB is 0.09 percentage points lower than TLT’s (0.06% vs. 0.15%). MBB is mostly comprised of AAA bonds and TLT has a high exposure to AAA bond. Overall, MBB has provided lower returns than TLT over the past 11 years.

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

Summary

MBB TLT
Name iShares MBS ETF iShares 20+ Year Treasury Bond ETF
Category Intermediate Government Long Government
Issuer iShares iShares
AUM 25.69B 15.15B
Avg. Return 3.08% 9.00%
Div. Yield 1.88% 1.5%
Expense Ratio 0.06% 0.15%

The iShares MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.

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%.

MBB’s dividend yield is 0.38% higher than that of TLT (1.88% vs. 1.5%). Also, MBB yielded on average 5.92% less per year over the past decade (3.08% vs. 9.00%). The expense ratio of MBB is 0.09 percentage points lower than TLT’s (0.06% 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

MBB - Holdings

MBB Bond Sectors Weight
AAA 99.51%
Others 0.49%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 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.

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

MBB TLT
Mean Return 0.2 0.63
R-squared 74.38 68.76
Std. Deviation 2.12 12.76
Alpha 0.14 -2.83
Beta 0.6 3.54
Sharpe Ratio 0.87 0.55
Treynor Ratio 3.02 1.82

The iShares MBS ETF (MBB) has a Mean Return of 0.2 with a Beta of 0.6 and a Treynor Ratio of 3.02. Its Alpha is 0.14 while MBB’s R-squared is 74.38. Furthermore, the fund has a Sharpe Ratio of 0.87 and a Standard Deviation of 2.12.

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

MBB’s Mean Return is 0.43 points lower than that of TLT and its R-squared is 5.62 points higher. With a Standard Deviation of 2.12, MBB is slightly less volatile than TLT. The Alpha and Beta of MBB are 2.97 points higher and 2.94 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 Gemini - the simplest and cheapest broker I've found! Click here to read more (link to Gemini).

Performance

Annual Returns

MBB vs. TLT - Annual Returns

Year MBB TLT
2020 4.03% 17.92%
2019 6.27% 14.93%
2018 0.81% -2.07%
2017 2.37% 8.92%
2016 1.28% 1.36%
2015 1.28% -1.65%
2014 6.16% 27.35%
2013 -1.92% -13.91%
2012 2.23% 3.25%
2011 5.88% 33.6%
2010 5.44% 9.25%

MBB had its best year in 2019 with an annual return of 6.27%. MBB’s worst year over the past decade yielded -1.92% and occurred in 2013. In most years the iShares MBS ETF provided moderate returns such as in 2012, 2017, and 2020 where annual returns amounted to 2.23%, 2.37%, and 4.03% 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

MBB vs. TLT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
MBB $10,000 $13,906 3.08%
TLT $10,000 $23,809 9.00%

A $10,000 investment in MBB would have resulted in a final balance of $13,906. This is a profit of $3,906 over 11 years and amounts to a compound annual growth rate (CAGR) of 3.08%.

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%.

MBB’s CAGR is 5.92 percentage points lower than that of TLT and as a result, would have yielded $9,903 less on a $10,000 investment. Thus, MBB performed worse than TLT by 5.92% 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 Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

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

Leave a Reply