Vanguard's VCLT outperforms iShares' TLT on yield, cost, and historical volatility, making it the preferred choice for long-term investors despite the inherent credit risk of corporate bonds.
VCLT is favored for long-term buy-and-hold investors due to lower expense ratio, higher dividend yield, and stronger historical performance with smaller maximum drawdown compared to TLT.
TLT offers scale and zero credit risk, but its higher expense ratio, lower yield, and larger drawdown make it less rewarding for most long-term investors according to the analysis.
Vanguard's VCLT ETF offers a superior risk-adjusted profile compared to the iShares TLT, boasting a 5.6% dividend yield and a lower 0.03% expense ratio. While TLT provides unmatched liquidity and zero credit risk as a Treasury-backed vehicle, historical data shows VCLT delivers stronger total returns and smaller drawdowns for buy-and-hold portfolios.
VCLT invests in investment-grade corporate debt, which carries a credit risk premium that government-backed Treasuries like those in TLT do not possess.
TLT carries zero credit risk as it is backed by the U.S. government, whereas VCLT is subject to corporate balance sheet risks. However, VCLT has historically demonstrated lower volatility and smaller drawdowns.