Updated rankings are out. Go to Best ETFs 2017: Long-term Bonds.
In this category the iShares ETF family lands in the top spot for cost efficiency, with its 7-10 Year Treasury Bond fund (IEF), and in the lead for assets, with iBoxx $ Investment Grade Corporate Bond (LQD).
Long bonds offer some prospect of real returns; coupons of 3% to 4% are comfortably ahead of present inflation. They come with risks, though.
All of them would suffer principal losses if interest rates rose. Some of them (the ones with “corporate” or “credit” in the name) would suffer in a recession that creates a fear of defaults.
If you are confident that rates will not rise, go way out on the maturity spectrum with Vanguard Extended Duration (EDV). This fund did well in 2014, when rates declined. It’s not doing well in 2015.
Another long-maturity product is the Pimco 25+ Year Zero Coupon U.S. Treasury fund (ZROZ). Typical of this fund family, it’s not particularly cheap.
Rules for the Best ETFs scorecard, and links to 13 categories of funds, can be found here.
| Ticker | Fund | Assets ($ mil)1 | Expense ratio (%) | 10-year cost2 |
|---|---|---|---|---|
| IEF | iShares 7-10 Year Treasury Bond | 6,237 | 0.15 | 184 |
| BLV | Vanguard Long-Term Bond | 1,158 | 0.1 | 185 |
| TLH | iShares 10-20 Year Treasury Bond | 392 | 0.15 | 191 |
| TLT | iShares 20+ Year Treasury Bond | 5,133 | 0.15 | 195 |
| TLO | SPDR Barclays Long Term Treasury | 169 | 0.1 | 202 |
| VCLT | Vanguard Long-Term Corporate Bond | 962 | 0.12 | 216 |
| EDV | Vanguard Extended Duration Treasury | 363 | 0.12 | 222 |
| ILTB | iShares Core 10+ Year USD Bond | 126 | 0.12 | 225 |
| VGLT | Vanguard Long-Term Government Bond | 233 | 0.12 | 243 |
| LQD | iShares iBoxx $ Invst Grade Crp Bond | 21,735 | 0.15 | 244 |
| LWC | SPDR Barclays Long Term Corp Bd | 270 | 0.12 | 272 |
| ZROZ | Pimco 25+ Year Zero Coupon US Trs | 152 | 0.15 | 313 |
| IBCC | iShares iBonds Mar 2018 Corp ex-Fincls | 173 | 0.1 | 326 |
| IBDD | iShares iBonds Mar 2023 Corporate | 62 | 0.1 | 333 |
| CLY | iShares 10+ Year Credit Bond | 771 | 0.2 | 355 |
| CORP | Pimco Investment Grade Corporate Bd | 235 | 0.2 | 357 |
| PLW | PowerShares 1-30 Laddered Treasury | 281 | 0.25 | 422 |
| BAB | PowerShares Build America Bond | 667 | 0.27 | 480 |
| PFXF | Market Vectors Pref Secs exFincls | 285 | 0.4 | 679 |
| BABS | SPDR Nuveen Barclays Build Amer Bd | 54 | 0.35 | 715 |
| 1: July 28, 2015. 2: Cost of holding $10,000 for a decade; assumes 5% growth. | ||||
| Sources: Morningstar, Bloomberg, fund distributors, Forbes | ||||