VGIT vs. IEF [Vanguard Int.-Term vs. iShares 7-10 Yr Gov't Bond]

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datamonkee
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VGIT vs. IEF [Vanguard Int.-Term vs. iShares 7-10 Yr Gov't Bond]

Post by datamonkee » Sun Aug 12, 2012 10:06 am

Why are they so different if they are supposed to cover the same asset class? And, which one is a better investment choice for this asset class?

dbr
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Re: VGIT vs. IEF

Post by dbr » Sun Aug 12, 2012 10:06 am

What are they? It is a good idea to post both the ticker symbol and the fund name.

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tludwig23
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Re: VGIT vs. IEF

Post by tludwig23 » Sun Aug 12, 2012 10:42 am

One tracks an index with a longer maturity/duration than the other.
That's what I do: I drink, and I know things. --Tyrion Lannister

Default User BR
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Re: VGIT vs. IEF

Post by Default User BR » Sun Aug 12, 2012 10:46 am

From Yahoo Finance:

VGIT: The fund employs a passive management or indexing-investment approach designed to track the performance of the Barclays Capital U.S. 3-10 Year Government Float Adjusted Index.

IEF: The investment seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Barclays U.S. 7-10 Year Treasury Bond Index


Brian

dbr
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Re: VGIT vs. IEF

Post by dbr » Sun Aug 12, 2012 11:38 am

Thanks So the answer is basically that within the asset class of bonds the factors that matter* are duration and credit quality. Lower duration and is less risky and should offer lower expected return. If I understand correctly both funds have the credit quality of US Treasuries. Is that right?

Another factor, not in play here, is inflation indexing for which one buys TIPS.

datamonkee
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Re: VGIT vs. IEF

Post by datamonkee » Mon Aug 13, 2012 7:13 am

Thanks for all the info guys. I had plotted the chart for VGIT and IEF and the volatility is explained by the maturity. I also plotted VGLT (the long term bond ETF) and IEF falls in between VGIT and VGLT, which intuitively makes sense.

The funds' holdings were interesting. VGIT holds 158 securities and VGLT holds 60 securities, but IEF only holds 23. Is this a concern for anyone? Also, for the asset allocation to treasuries, which ETFs do you all prefer use?

YDNAL
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Re: VGIT vs. IEF

Post by YDNAL » Mon Aug 13, 2012 8:15 am

datamonkee wrote:Thanks for all the info guys. I had plotted the chart for VGIT and IEF and the volatility is explained by the maturity. I also plotted VGLT (the long term bond ETF) and IEF falls in between VGIT and VGLT, which intuitively makes sense.

The funds' holdings were interesting. VGIT holds 158 securities and VGLT holds 60 securities, but IEF only holds 23. Is this a concern for anyone? Also, for the asset allocation to treasuries, which ETFs do you all prefer use?

Your username may be the culprit here, but you are dancing on the head of pin IMO. Treasuries are Treasuries and average Duration should coincide with the timeframe in which you need the money. Nothing else.
Vanguard wrote:Vanguard Intermediate-Term Government Bond ETF (VGIT)
Expense ratio: 0.14%

Number of bonds 158
Yield to maturity 0.9%
Average coupon 2.8%
Average maturity 5.7 years
Average duration 5.3 years
iShares wrote:iShares Barclays 7-10 Year Treasury Bond Fund (IEF)
Expense ratio: 0.15%

Number of bonds 23 (as of 8/9/2012)
Yield to maturity 1.39%
Average coupon 2.94%
Average maturity 8.44 years
Effective duration 7.47 years
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

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tludwig23
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Re: VGIT vs. IEF

Post by tludwig23 » Mon Aug 13, 2012 8:17 am

dbr wrote:Thanks So the answer is basically that within the asset class of bonds the factors that matter* are duration and credit quality. Lower duration and is less risky and should offer lower expected return. If I understand correctly both funds have the credit quality of US Treasuries. Is that right?

Another factor, not in play here, is inflation indexing for which one buys TIPS.


Both are Treasuries (therefore same credit quality).
Neither hold TIPS--these funds hold nominal bonds.
Duration is the difference.
That's what I do: I drink, and I know things. --Tyrion Lannister

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watchnerd
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Re: VGIT vs. IEF

Post by watchnerd » Sat Jul 11, 2015 1:41 pm

IEI (3-7 year Treasury ETF, duration 4.56 years) is the more analogous iShares ETF to VGIT (duration 5.3 years).
Tweaked 3-Fund: 35% US Equities | 35% Total International | 30% Intermediate Treasuries

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