Understanding the iShares 20+ Year Treasury Bond ETF (TLT)

What this ETF is trying to do

The iShares 20+ Year Treasury Bond ETF (TLT) is an exchange-traded fund that focuses on long-term U.S. government bonds. These are debt securities issued by the government that last for 20 years or more.

What the numbers show

When looking at an ETF, it is important to understand two different types of returns: price return and total return.

• Price Return: This only tracks how much the share price itself has changed.

• Total Return: This includes both the change in share price *and* any cash distributions (dividends) paid out to investors.

For TLT, the numbers show different trends depending on how much time you look at:

• Year-to-Date (YTD): The price return is approximately -11.53%, while the total return is approximately -8.44%.

• One Year: The price return is approximately -13.73%, while the total return is approximately -9.72%.

• Three Years: The price return is approximately -10.16%, but the total return is positive at approximately 2.07%.

To visualize the price change, if you had invested in this ETF at its estimated price from roughly one year ago ($89.38), the current price of $77.11 represents a decline in share value.

Income and distribution explanation

This ETF provides regular cash payments to investors. The distribution yield is approximately 5.05%. This means the amount of cash paid out is about 5.05% of the current share price. These distributions usually happen monthly, with Monday being the most common day for payments.

It is important to remember that a high distribution yield does not mean you are making that much profit. You must look at the total return to see how the price changes affect your overall investment.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases over time. StockValueFinder uses an erosion-risk score to measure this risk. TLT has an erosion score of 75, which is labeled as "Mild price erosion." This is a measurement of price trends and does not mean the fund's value has definitely collapsed.

Pros

• The ETF provides regular monthly cash distributions.

• Over a three-year period, the total return has been positive (approximately 2.07%), even though the share price itself went down.

Cons

• The ETF has experienced a decline in its share price over the last year and year-to-date.

• The five-year total return is approximately -35.77%.

Beginner takeaway

When looking at TLT, notice the difference between the falling share price and the total return. While the price of a single share has gone down recently, the total return (which includes the cash paid out to you) tells a different story over longer periods. Always look at both numbers to understand how an ETF is performing.