SGOV is a relatively new ETF from iShares for 0-3 month U.S. Treasury bonds, called T-bills. But is it a good investment for 2024? I review it here.
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Contents
SGOV ETF Review Video
Prefer video? Watch it here:
SGOV ETF Methodology, Dividend Yield, and Fees
SGOV is the iShares 0-3 Month Treasury Bond ETF. It launched in mid-2020 and has since quickly amassed nearly $25 billion in assets, making it one of the most popular ETFs for Treasury Bills. SGOV took in nearly $1 billion in its first 5 months.
SGOV is a pretty simple fund. It just tracks an index that holds ultra short term U.S. Treasury bonds – called T Bills – that mature in 3 months or less. That index is the ICE 0-3 Month US Treasury Securities Index, which is rebalanced monthly.
Because T-bills are the safest bonds out there, we call them a “cash equivalent” and the 3-month T-bill rate is used as what we call the “risk-free rate” when comparing other assets. Some investors even use T-bill funds like SGOV as a savings account for their emergency fund.
The phrase “cash equivalent,” may make you think negligible returns, but T-bills have returned 3.32% annualized historically going back to 1926 for the U.S.
Inflows into T-bill funds like SGOV have soared in recent months to capture their currently-very-attractive yield and to take up a safe haven in short-term U.S. government debt issues. At the time of writing in January 2023, the 3 month T Bill rate is 4.57%, and 5% is not out of the question by the end of the year. Even the past 30 days or so going into 2023 have seen record inflows – nearly $10 billion in the first trading week of the year – into short-term government bond funds after fearful investors are fleeing stocks en masse.
SGOV has an SEC yield of 5.01% and an effective duration of a little over 1 month. It pays its dividend monthly. SGOV is also a very affordable ETF for T-bills with a fee of 0.09%.
Update 7/21/23: SGOV now has an SEC yield of 5.21% as of July 21, 2023.
Update 7/19/24: SGOV's fee waiver expired this month so it now costs 0.09%. It has an SEC yield of 5.25%.
SGOV ETF Performance
In its short lifespan thus far, SGOV has beaten its index:
Is SGOV a Good Investment?
So is SGOV a good investment? Sure, if you want T-bills and don't want to bother with buying and rolling a ladder of individual bonds yourself.
SGOV is clearly a great low-cost index fund for T-bills, evidenced by its huge AUM and massive inflows in 2023, and it's one of the cheapest in its space.
Conveniently, SGOV should be available at any major broker, including M1 Finance, which is the one I'm usually suggesting around here.
What do you think of SGOV? Do you own it? Let me know in the comments.
Disclosure: None.
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Hi John,
Just a heads up that it looks like the fee waiver was extended until June 30, 2024. Though they are waiving fewer basis points, not that it really matters right now. The new expense ratio is 0.07%
What are the chances the fee waiver doesn’t get renewed for 2023? Does the actual expense ratio change the calculation?
What about the new kid:
https://www.ustreasuryetf.com/etf/tbil/
Unlikely, but possible I suppose. Even without the waiver, SGOV would still be cheaper than TBIL.
The Public investing app just started a T-bills account advertising a 5.1% yield, but has a .60% annualized fee. It uses 26-week T-bills. Looks like SGOV might be one of the best alternatives for avoiding that higher fee?