Exchange Traded Funds (ETFs)

Going the Distance with SPTL

In today’s economy, investors are looking for exchange-traded funds (ETFs) that can go the distance and ride out what may be an impending recession.

Looking forward, the macroeconomic environment likely will be shaped by three key elements: slowing growth, falling inflation and central bank rate cuts. If this is indeed the case, longer-dated, fixed-income exchange-traded funds (ETFs) should outperform.

One way for investors to take advantage of that outlook is through several best-of-breed investment vehicles for embracing duration in bond portfolios. The first of those investments is SPDR Portfolio Long Term Treasury ETF (SPTL).

SPTL is a low-cost ETF that seeks precise and comprehensive exposure to the entire long-term U.S. Treasury spectrum of bonds with remaining maturities of 10 years or more — excluding inflation-protected bonds. The fund uses a sampling method to track its index, the Bloomberg Long U.S. Treasury Index.

Simply, the fund invests in a sample of securities that collectively have an investment profile like the benchmark. While SPTL is one of the lower-cost core SPDR Portfolio ETFs, its long-effective duration, weighted-average maturity and yield-to-maturity naturally may expose investors to elevated interest-rate risk. But it’s no more risk than is expected in the market.

SPTL has $5.74 billion in net assets and a low expense ratio of 0.06%. As is visible in the chart below, the fund showed a sharp decline last October but recouped a fair amount of ground by December.

Courtesy of Stockcharts.com.

Overall, SPTL is a cost-efficient ETF offering investors comprehensive exposure to the U.S. Treasury spectrum of bonds with remaining maturities of 10 years or more. While SPTL may be more sensitive to interest-rate fluctuations than vehicles with a shorter duration, it is nothing extraordinary.

So, for investors looking for a best-of-breed investment vehicle to go the distance, the SPDR Portfolio Long Term Treasury ETF may be worth considering.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.