SCHQ Proves More Affordable Than TLT for Bond Investors

Core Viewpoint - The Schwab Long-Term U.S. Treasury ETF (SCHQ) offers a lower expense ratio and gentler drawdowns compared to the iShares 20 Year Treasury Bond ETF (TLT), making it an attractive option for fixed income investors seeking long-dated U.S. government debt exposure [1][4]. Cost Comparison - SCHQ has an expense ratio of 0.03%, significantly lower than TLT's 0.15% [3][4]. - SCHQ provides a slightly higher dividend yield of 4.6% compared to TLT's 4.4% [3]. - The assets under management (AUM) for TLT is $45.2 billion, while SCHQ has $902.5 million [3]. Performance & Risk Analysis - Over the past five years, SCHQ has a max drawdown of -40.88%, which is less severe than TLT's -43.70% [5]. - A $1,000 investment in SCHQ would have grown to $599, compared to $573 for TLT over the same period [5]. - SCHQ exhibits lower volatility with a beta of 0.52, while TLT has a beta of 2.34, indicating greater price volatility relative to the S&P 500 [3]. Portfolio Composition - SCHQ tracks the long-term U.S. Treasury bond market with a portfolio of 98 holdings, providing more diversification than TLT, which holds only 45 positions [6][7]. - Both funds exclusively invest in U.S. Treasury bonds, avoiding corporate or non-Treasury exposure, but TLT's concentration in fewer holdings may increase risk [7]. Market Outlook - Following two Federal Reserve rate cuts in Q4 2026, interest rates may continue to decline, potentially increasing demand for bonds as investors seek to lock in higher yields [9]. - While SCHQ is currently viewed as the better option due to its performance and lower volatility, TLT could outperform if interest rates decline further [10].