TLT vs IEF

TLT holds US Treasuries maturing in 20 years or more; IEF holds the 7-10 year part of the curve. Both are backed by the US government, so credit risk is negligible — the entire difference is interest-rate sensitivity.

TLT's long duration means its price swings violently when rates move. IEF, with roughly a third of TLT's duration, delivers a much smoother ride.

When the Fed raised rates aggressively in 2022, TLT fell more than 30% — one of the worst years ever for long Treasuries. IEF fell too, but far less. This is the trade-off long-duration investors accept: bigger gains when rates drop, bigger losses when they rise.

Conversely, in a sharp flight-to-safety rate decline, TLT can rally double digits while IEF posts only modest gains.

Strategies that deliberately want a powerful equity hedge — like Ray Dalio's All Weather or the Permanent Portfolio — lean on long-term Treasuries similar to TLT for their convexity. More balanced strategies often prefer intermediate bonds like IEF to dampen volatility.

If you want maximum diversification benefit against a stock crash and can stomach the volatility, TLT is the tool. If you want ballast without the wild swings, IEF is the safer default.