Treasury ETFs

We've talked about both treasury bonds as well as Exchange Traded Funds or ETFs. For those who are interested in taking a position in treasuries, but want to do it with the liquidity of a stock, treasury ETFs can be a handy tool.

Why Treasury ETFs?

One of the more compelling reasons to invest in treasury bonds is security. You might also want to hedge against the stock market. If your stocks are going up, there's a good chance that your treasuries are going down and vise versa. This can take some of the risk out of your portfolio.

Long term treasuries can also give favorable returns compared to a cash investment like a certificate of deposit. Right now CDs are paying interest rates around 1%, while 30 year treasuries are paying around 4.5%. Of course for many of us the thought of locking up your money for 30 years can sound rather intimidating.

Sometimes it might be more convenient to buy and sell the treasuries rather than buying them directly from the government. While there are some differences, in general the ETF offers a convenient way to buy and sell bonds.

Which ETFs?

There are three popular ETFs for treasuries: TLT, IEF and SHY.

TLT - TLT is the fund for long-term bonds. The underlying assets for this fund are typically with maturity dates of 20 years or more.

IEF - IEF is the fund for moderate term bonds. The bonds in this fund are dated from 7 to 10 years.

SHY - SHY holds short term bonds with maturity dates from 1-3 years.

The question of whether bonds are a good investment at any given time depend on a number of variables, but if you are interested in investing in treasury bonds an ETF can be a convenient answer.

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