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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.
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#investing #treasurybonds #bonds
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