The iShares 20+ Year Treasury Bond ETF (TLT) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. TLT is a iShares Long Government fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between TLT and DFAC? And which fund is better?
The expense ratio of TLT is 0.04 percentage points lower than DFAC’s (0.15% vs. 0.19%). TLT is mostly comprised of AAA bonds while DFAC has a high exposure to the technology sector. Overall, TLT has provided lower returns than DFAC over the past 11 years.
In this article, we’ll compare TLT vs. DFAC. We’ll look at annual returns and holdings, as well as at their fund composition and industry exposure. Moreover, I’ll also discuss TLT’s and DFAC’s performance, risk metrics, and portfolio growth and examine how these affect their overall returns.
Summary
| TLT | DFAC | |
| Name | iShares 20+ Year Treasury Bond ETF | Dimensional U.S. Core Equity 2 ETF |
| Category | Long Government | Large Blend |
| Issuer | iShares | Dimensional Fund Advisors |
| AUM | 15.15B | 13.53B |
| Avg. Return | 9.00% | 13.93% |
| Div. Yield | 1.5% | 1.0% |
| Expense Ratio | 0.15% | 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%.
The Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.
TLT’s dividend yield is 0.50% higher than that of DFAC (1.5% vs. 1.0%). Also, TLT yielded on average 4.94% less per year over the past decade (9.00% vs. 13.93%). The expense ratio of TLT is 0.04 percentage points lower than DFAC’s (0.15% vs. 0.19%).
Fund Composition
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.
| DFAC Holdings | Weight |
| Apple Inc | 4.7% |
| Microsoft Corp | 3.81% |
| Amazon.com Inc | 2.39% |
| Johnson & Johnson | 1.05% |
| Facebook Inc Class A | 1.05% |
| JPMorgan Chase & Co | 1.0% |
| Alphabet Inc Class C | 0.85% |
| Alphabet Inc Class A | 0.84% |
| Berkshire Hathaway Inc Class B | 0.75% |
| Visa Inc Class A | 0.74% |
DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.
JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.
Risk Analysis
| TLT | DFAC | |
| Mean Return | 0.63 | 1.19 |
| R-squared | 68.76 | 95.1 |
| Std. Deviation | 12.76 | 15.55 |
| Alpha | -2.83 | -2.75 |
| Beta | 3.54 | 1.12 |
| Sharpe Ratio | 0.55 | 0.88 |
| Treynor Ratio | 1.82 | 11.85 |
The iShares 20+ Year Treasury Bond ETF (TLT) has a Treynor Ratio of 1.82 with a Standard Deviation of 12.76 and a R-squared of 68.76. Its Sharpe Ratio is 0.55 while TLT’s Beta is 3.54. Furthermore, the fund has a Alpha of -2.83 and a Mean Return of 0.63.
The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Alpha of -2.75 with a Treynor Ratio of 11.85 and a Standard Deviation of 15.55. Its Mean Return is 1.19 while DFAC’s Beta is 1.12. Furthermore, the fund has a R-squared of 95.1 and a Sharpe Ratio of 0.88.
TLT’s Mean Return is 0.56 points lower than that of DFAC and its R-squared is 26.34 points lower. With a Standard Deviation of 12.76, TLT is slightly less volatile than DFAC. The Alpha and Beta of TLT are 0.08 points lower and 2.42 points higher than DFAC’s Alpha and Beta.
Performance
Annual Returns
| Year | TLT | DFAC |
| 2020 | 17.92% | 15.8% |
| 2019 | 14.93% | 29.54% |
| 2018 | -2.07% | -9.43% |
| 2017 | 8.92% | 18.82% |
| 2016 | 1.36% | 16.31% |
| 2015 | -1.65% | -2.53% |
| 2014 | 27.35% | 9.56% |
| 2013 | -13.91% | 37.55% |
| 2012 | 3.25% | 17.93% |
| 2011 | 33.6% | -1.96% |
| 2010 | 9.25% | 21.67% |
TLT had its best year in 2011 with an annual return of 33.6%. TLT’s worst year over the past decade yielded -13.91% and occurred in 2013. In most years the iShares 20+ Year Treasury Bond ETF provided moderate returns such as in 2012, 2017, and 2010 where annual returns amounted to 3.25%, 8.92%, and 9.25% respectively.
The year 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| TLT | $10,000 | $23,809 | 9.00% |
| DFAC | $10,000 | $38,796 | 13.93% |
A $10,000 investment in TLT would have resulted in a final balance of $23,809. This is a profit of $13,809 over 11 years and amounts to a compound annual growth rate (CAGR) of 9.00%.
With a $10,000 investment in DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.
TLT’s CAGR is 4.94 percentage points lower than that of DFAC and as a result, would have yielded $14,987 less on a $10,000 investment. Thus, TLT performed worse than DFAC by 4.94% annually.
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