FIGB Offers Higher Yield Than IEI With Broader Bond Mix but Lower 1-Year Return

Core Viewpoint - The iShares 3-7 Year Treasury Bond ETF (IEI) and Fidelity Investment Grade Bond ETF (FIGB) present distinct investment profiles, with IEI focusing on U.S. Treasury bonds and FIGB offering broader credit exposure with higher yields but at increased costs and risks [1][2]. Cost and Size Comparison - IEI has a lower expense ratio of 0.15% compared to FIGB's 0.36% - The one-year return for IEI is 2.7%, while FIGB's is 2.2% - IEI offers a dividend yield of 3.5%, whereas FIGB provides a higher yield of 4.15% - The beta for IEI is 0.71, indicating lower volatility compared to FIGB's beta of 1.01 - Assets under management (AUM) for IEI stand at $17.7 billion, significantly larger than FIGB's $354.6 million [3]. Performance and Risk Comparison - The maximum drawdown over four years for IEI is -10.86%, while FIGB experienced a larger drawdown of -15.62% - An investment of $1,000 would have grown to $941 in IEI and $881 in FIGB over the same four-year period [5]. Portfolio Composition - FIGB holds 689 different bonds, including both government and high-quality corporate debt, providing a broader credit profile and potentially higher yield but with additional credit risk [6]. - IEI exclusively invests in U.S. Treasury bonds, currently holding 84 government issues, ensuring maximum credit quality and interest rate sensitivity without corporate risk exposure [7]. Implications for Investors - Investing in bond ETFs like IEI and FIGB can diversify portfolios, generate recurring income, and reduce overall risk, especially in uncertain economic conditions - IEI is considered the safer option due to its exclusive investment in U.S. Treasury bonds, which are viewed as highly secure - The intermediate-term focus of IEI offers a balance in interest rate sensitivity, being less exposed to interest rate risk than long-term bonds but more than short-term ones [8].