TLT vs SHY: Extreme Duration or Capital Preservation?
TLT and SHY represent the two extremes of the US Treasury yield curve. TLT holds 20+ year Treasury bonds (duration ~17 years) — an aggressive interest rate bet that can move 30%+ in a year. SHY holds 1-3 year Treasuries (duration ~1.8 years) — essentially a cash-like parking vehicle with minimal price volatility. They serve completely different portfolio roles.
Key Differences
- Duration: TLT ~17 years vs SHY ~1.8 years — TLT is ~9x more sensitive to rate changes
- Yield: TLT typically yields more than SHY, but the yield curve can invert (as in 2022-2024)
- TLT lost ~45% from 2020 to 2023 as rates rose; SHY lost ~5% over the same period
- TLT is a crisis hedge — it tends to rally sharply when stocks crash; SHY barely moves
- SHY is a cash alternative; TLT is a macro trade on interest rate direction
Live Comparison
Interactive comparison with real data. Toggle dividends and tax settings to see the full picture.
Bottom Line
SHY for capital preservation and cash management — stable, boring, reliable. TLT only if you have a specific thesis about falling rates or need a crisis hedge for your equity portfolio. Never use TLT as a core bond holding — its duration makes it behave more like a volatile equity position.