GOVT ETF Review - iShares Total US Treasury Bond ETF

GOVT ETF Review - iShares Total US Treasury Bond ETF - Better Than BND?

Рет қаралды 2,499

Күн бұрын

GOVT is a total U.S. Treasury bond market ETF from iShares that covers the entire yield curve. But is it a good investment? I review it here.
// TIMESTAMPS:
00:00 - Intro
00:08 - GOVT ETF Methodology and Fees
01:26 - Is GOVT a Good Investment?
// SUMMARY:
GOVT from iShares is the only ETF I know of for the total U.S. treasury bond market. It launched in late 2012 and has since amassed over $25 billion in assets.
GOVT tracks a market-weighted index for fixed-rate U.S. treasury bonds of maturities between 1 year and 30 years. As such, it has an effective intermediate weighted average maturity of about 8 years.
As of 2016, GOVT tracks the ICE U.S. Treasury Core Bond Index. Previously it tracked the Barclays U.S. Treasury Bond Index. These are indexes for US government bonds.
I've gone into detail elsewhere about how treasury bonds (aka government bonds) should probably be preferable to corporate bonds in a portfolio with stocks due to their inherently lower correlation and lower risk profile, among other things. Some may not realize that total bond market funds like BND and AGG contain about 25% corporate bonds.
Bogleheads usually like to stick to broad total market index funds from Vanguard. Unfortunately, Vanguard does not have a total treasury bond market product. GOVT provides a solution for the index investor who wants a total market fund but who also wants to stick to U.S. treasuries instead of the total U.S. bond market.
So is GOVT a good investment? Maybe.
Again, I think GOVT is a great solution for the index investor who prefers to stick with U.S. treasury bonds as opposed to a total bond market fund that includes corporate debt issues. Clearly there are many of those investors, evidenced by the fund's billions of dollars in assets.
These benefits are more significant than they may initially sound. The simplicity of simply “owning the market” and taking the guesswork out of choosing a particular part of the treasury yield curve - all at a relatively low fee of 0.05% - can be extremely valuable. With GOVT, you own the whole curve.
For these reasons, this fund still gets the Bogleheads stamp of approval even though it's not from Vanguard.
Usually, your effective bond duration should depend on your personal goal(s), time horizon, risk profile, and other investments, so GOVT may or may not be suitable for you. As a total treasury market fund, GOVT may be attractive for both the well-diversified young investor and the retiree who wants to go full U.S. treasury bonds and avoid corporate bonds. Watch my video here to learn why that might be a prudent idea.
What do you think of GOVT? Do you own it? Let me know in the comments.
Read the blog post here: www.optimizedp...
#investing #treasurybonds #bonds
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Пікірлер: 39

@OptimizedPortfolio Ай бұрын

What do you think of the GOVT ETF from iShares for the total US Treasury bond market? Do you own it?

@Omar-et7sb Ай бұрын

I am glad someone said this, but I strongly agree that treasury bonds (considering the purpose of bonds in a portfolio) are significantly preferred over corporate ones. And, unlike with stocks, I don't see a major reason for international bond exposure.

@OptimizedPortfolio Ай бұрын

Agreed.

@DrWild5 Ай бұрын

Almost got GOVT, but SPTB is similar and slightly smaller expense ratio.

@OptimizedPortfolio Ай бұрын

Thanks for sharing this new fund! I didn't know it existed. Still far too low AUM for my tastes, though.

@dodger2051 Ай бұрын

@@OptimizedPortfolio Looks like a whole new range of ETFs from SPDR branded "SPDR Portfolio" (under Low Cost Core in their filters), interesting alternative to Vanguard once they grow larger?

@EclipseAgito229 Ай бұрын

Me atrai particularmente os investimentos no Tesouro Americano, principalmente de curto prazo como o TFLO. Como investidor fiscal no Brasil, prefiro eles do que os títulos corporativos dentro e fora dos EUA.

@OptimizedPortfolio Ай бұрын

Thanks for sharing!

@daveschmarder-1950 Ай бұрын

I started buying GOVT about a year and a quarter ago in my IRA. I expect it to do well as the Fed begins to lower rates, whenever that happens. All of my smallish IRA is in Treasury Bills, XTRE and GOVT. I'm in my early RMD and Roth Conversion stage.

@OptimizedPortfolio Ай бұрын

Thanks for sharing!

@1337b3nnyvav00m 29 күн бұрын

Can you please do a review on the Simplify Enhanced Income ETF (HIGH)? It uses a call spread to supplement the income from T-bills and I’m thinking about adding it to my portfolio as a slightly higher risk higher return portion of my emergency fund. I love your content, thank you so much!

@OptimizedPortfolio 29 күн бұрын

Thanks for the suggestion!

@klittlet005 Ай бұрын

Wouldn't long term government bond funds be better to pair with equities?

@OptimizedPortfolio Ай бұрын

As usual, depends on one's goal(s), time horizon, and need, capacity, and tolerance for risk, and what you mean by "better."

@NivHaramati Ай бұрын

@@OptimizedPortfolio I think by "better" he means a more uncorrelated to equities, as an asset class. and if you flow with that idea, isn't it sensible to hold very long duration treasury bonds? something like EDV? even regardless of your investment horizon?

@OptimizedPortfolio Ай бұрын

@@NivHaramati All else equal, it would indeed be more suitable for a young investor with a long horizon to hold longer bonds, assuming their risk tolerance allows for a more volatile fund that may, in isolation, drop more in a year than a shorter duration fund, though of course this is mental accounting.

@ebrahimhabib477 28 күн бұрын

No I don’t own it but considering it and what you think which is could be better govt or High from simplify . ? What you think ? And many than,s for the video as usual super good

@OptimizedPortfolio 28 күн бұрын

I can't provide personalized advice, but as usual, it comes down to the context - goal(s), time horizon, and need, capacity, and tolerance for risk. Those are 2 completely different products.

@sean3569 Ай бұрын

I really cant figure out if i should add bonds to my portfolio or nah. could you possibly do a video explaining bonds and why (or why not) someone should include bonds in thier portfolio?

@OptimizedPortfolio Ай бұрын

Thanks for the suggestion. For now, I've my personal reasons for including them in a blog post on my portfolio here: www.optimizedportfolio.com/ginger-ale-portfolio/ And a more general one on bonds here: www.optimizedportfolio.com/how-to-buy-bonds/

@ericjhernandez17 Ай бұрын

Si this etf is like a total bond treasury?

@OptimizedPortfolio Ай бұрын

Total US Treasury bond market.

@Fadi-hl8ox 19 күн бұрын

Hello sir how are you. I have a question for you. So what are your thoughts on VICI?

@OptimizedPortfolio 18 күн бұрын

I don't know what that is.

@Fadi-hl8ox 18 күн бұрын

@@OptimizedPortfolio VICI properties I believe a type of REIT

@tbhideciaintshowingup Ай бұрын

Um, what about VGIT?

@OptimizedPortfolio Ай бұрын

VGIT is an intermediate treasury fund with an avg. maturity of about 6 years.

@NivHaramati Ай бұрын

I hold GOVT, I like the idea of it holding all the curve. question: is it exactly the same as holding intermediate government bonds of it's average (about 8 years)? if not - then what is the difference? I heard this can become a very complex issue.

@OptimizedPortfolio Ай бұрын

Excellent question. With some hand waving, those two options should behave nearly identically. The main tangible differences would be: A) GOVT may have to do more buying/selling than a comparable intermediate fund, which may be of concern for taxable space, and B) not really what you asked, but "average" and "intermediate" aren't necessarily the same thing in that GOVT just has the average duration of the total market, which can shift up or down, while a dedicated "intermediate" fund is aiming for a specific target duration.

@NivHaramati Ай бұрын

@@OptimizedPortfolio Thanks for the answer. In that case though - does GOVT has ANY advantage at all on pure intermediate duration treasuries?

@OptimizedPortfolio Ай бұрын

@@NivHaramati Another great question. Arguably, like I noted, simplicity and less mental effort required in just "buying the total market." That may sound silly to the seasoned investor, but it's potentially valuable behaviorally for the novice. You'd be surprised at how fervent Bogleheads get about that goal, though. Many of them would likely choose GOVT over intermediate treasuries.

@NivHaramati Ай бұрын

@@OptimizedPortfolio But in treasury bonds - whats the point of "holding all the market"? I mean - It's not stocks with many totally different risks - they are all government treasuries. So, do you think it's better, say, hold each asset class of bonds (tips/short/intermediate/long)? or a kind of a Bar Bell - holding only long (say EDV) and short (say SGOV)? I'm asking from pure portfolio construction view - nothing to do with your investment horizon. I think I've learned that long bonds are a good asset to hold no matter what, because it is a good balance for equities (not correlated or even negatively correlated) - so it is wise to hold it just because of that. I know there is no "perfect portfolio" but I really want to learn what is a sensible one.

@OptimizedPortfolio Ай бұрын

@@NivHaramati I agree with you. I'm not saying there's a rational, objective benefit. Sometimes the irrational, psychological benefits can be just as useful. That's what I was hinting at with mentioning how passionate Bogleheads can get about simplicity and "owning the total market." It's not always perfectly logical, and it doesn't have to be. I can't provide personalized advice. I've written extensively about my views on bonds on my blog. But again, there is no "better" duration. It all depends on context. And investment horizon is one of the primary factors of portfolio construction, so saying "nothing to do with investment horizon" makes no sense.

@JosephDickson Ай бұрын

Bogleheads and Vanguard are not the same thing. That brokerage has plenty of non-Boglehead options to choose from like any other brokerage. 😉

@OptimizedPortfolio Ай бұрын

I'm aware. But Bogleheads typically prefer Vanguard products, and Vanguard doesn't offer quite a few riskier securities that other brokerages do have.

@Jpsantos94 Ай бұрын

So is GOVT the opposite of SGOV? Long term vs short term?

@OptimizedPortfolio Ай бұрын

Not so much "opposite," but certainly much longer duration. SGOV is 3 month T-Bills. GOVT is effectively intermediate (about 8 years). Something like TLT is arguably "opposite" - 20 years.

@Jpsantos94 Ай бұрын

@@OptimizedPortfolio gotcha. Thanks

@OptimizedPortfolio Ай бұрын

Anytime!