Is the TLT ETF a Good Bet for the Long Run?

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Dan Moskowitz
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Dan Moskowitz is a freelance financial writer who has 4+ years of experience creating content for the online reading market.
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Updated August 26, 2023
Reviewed by Julius Mansa
Fact checked by
Ryan Eichler
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Fact checked by Ryan Eichler
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Ryan Eichler holds a B.S.B.A with a concentration in Finance from Boston University. He has held positions in, and has deep experience with, expense auditing, personal finance, real estate, as well as fact checking & editing.
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When looking at the iShares 20 Plus Year Treasury Bond (TLT) exchange-traded fund (ETF), one of the first points to consider is whether interest rates are likely to go up or down in the foreseeable future. The relationship between Treasury bond yields and interest rates is the key to its performance.

Generally speaking, if you expect that interest rates will rise in the future, it is best to avoid long-term bonds such as those that are tracked by the TLT. If that happens, you're locking in a lower interest rate.

If you believe interest rates will fall, then it makes sense to invest in a long-term bond fund like the TLT. 

To start, let’s look at TLT’s key metrics.

Key Metrics of TLT ETF

  • Purpose: Tracks the Barclays U.S. 20+ Year Treasury Bond Index.
  • Inception date: July 22, 2002
  • 30-day average volume: 24,825,175
  • Expense ratio: 0.15% (very low)
  • Year-to-date performance: 4.08%
  • 1-year performance: -7.82%
  • 3-year performance: 12.71%

All figures are as of June 30, 2023.

Economy and the Fed

Interest rates in the U.S. had been historically low ever since the 2008-2009 financial crisis. But in the wake of the COVID-19 pandemic, inflation began to hit hard, jeopardizing the economy and harming millions of American consumers.

The Federal Reserve responded by raising interest rates in a series of actions that began in March 2022. Rates were raised 11 more times over the following 18 months. As of August 2023, the Fed was not promising it wouldn't raise rates again in order to achieve its goal of 2% inflation.

Inflation and Treasury Bond Rates

The impact of interest rate increases can be seen clearly in Treasury bond rates. The 10-year Treasury rate sank as low as 0.64% in mid-July 2020. On Aug. 14, 2023, the rate stood at 4.26%.

Those who want to invest in bonds might well consider high-quality short-term government bonds. U.S. bonds are likely to be a sound bet, short- or long-term.

Bond investments also have liquidity, opening up possibilities for action if economic circumstances change. For example, if stocks tank, the bond investor has the option of cashing out in order to buy stocks at big discounts.

The above analysis is a macro perspective. It’s impossible to time the market, but it’s relatively easy to predict long-term results based on logic and trends.

Are Treasury Bonds a Good Investment?

Treasury bonds have some real strong points. They are as safe as an investment can be, given that they are backed by the full faith and credit of the U.S. government. They are small-investor friendly, being issued in denominations as little as $100. They are exempt from taxes, too.

That said, Treasury bonds pay a relatively modest interest rate, even compared to some corporate bonds. So, you might not get rich but you won't go broke investing in Treasury bonds.

Can I Buy Treasury Bonds Directly?

You can buy Treasury bonds directly from the U.S. Treasury at TreasuryDirect.gov. The site allows purchases of savings bonds, 10-year notes, and 30-year bonds.

Treasury bonds also are sold by banks and brokerages.

What Other Types of Bond ETFs Are There?

There is a wide variety of bond ETFs available. Like most ETFs, the funds track a specific bond index or other benchmark.

An investor might choose an investment-grade corporate bond ETF to get the slightly higher yield that these offer compared to U.S. Treasuries.

An investor who has a higher risk tolerance might choose a bond ETF that contains some higher-yield bonds, otherwise known as junk bonds.

The Bottom Line

TLT is a high-quality ETF, thanks to a low expense ratio and liquidity. It should present a decent investment opportunity in the near future due to low-interest rates which drive up the price of bonds, but it’s probably not the best place to be over the next few years. Consider short-term high-quality short-term government bonds, the U.S. dollar, and best of all cash.

Dan Moskowitz does not have any positions in TLT. He is currently long in FAZ, TECS, DRR, and BIS.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

  1. iShares. "iShares 20+ Year Treasury Bond ETF: Fact Sheet as of 06/30/2023."

  2. iShares. "iShares 20+ Year Treasury Bond ETF."

  3. The Federal Reserve. "What economic goals does the Federal Reserve seek to achieve through its monetary policy?"

  4. MacroTrends. "10 Year Treasury Rate - 54 Year Historical Chart."

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