5. Choosing between bond ETFs, TIPS, and currency exposure

Official sources checked September 6, 2026. Unless stated otherwise, numbers and scenarios are hypothetical, not current rates or product returns.

An ETF can feel easier than an individual-bond order: specify a share quantity and buy a portfolio. Yet “U.S. Treasury ETF” says little about how much its price can move.

Short and long funds serve different purposes

SGOV’s official page describes an index of U.S. Treasuries with maturities of zero to three months. TLT’s describes Treasuries with remaining maturities greater than twenty years.¹² They illustrate different maturity exposures, rather than recommendations to buy either.

Frequently replacing short securities generally means less price sensitivity but quicker adjustment of future income when rates decline. Long holdings can have much greater price sensitivity. Do not interchange a cash-management role and a long-rate position based only on quoted income.³

An individual bond’s remaining maturity shrinks with time. A conventional fund maintaining a maturity range replaces securities. Holding its shares for ten years does not give you a contractual repayment of your purchase amount on a fixed date.

Defined-maturity funds are a separate category. The iBonds range, for example, has designated termination years. A termination year still does not guarantee a particular final payout. Read the specific fund’s final distribution and cash-management provisions.⁴

Distributions can arrive during a loss

Buy at 100, receive distributions of 4, and end at 90: the simple return is (90 + 4 − 100) / 100 = −6%, with distributions held in cash and taxes and costs ignored. Monthly income does not establish a positive total return.

Fund pages distinguish SEC yield, trailing distribution yield, average YTM, and duration.² Compare definitions and dates rather than treating any one metric as a guaranteed next-year total return.

Also inspect market price, net asset value, bid–ask spread, and costs. An executable trade price is different from an asset valuation. A limit order can control the acceptable price but may not execute.

TIPS and floating-rate notes

TIPS adjust principal with U.S. consumer prices. At maturity, Treasury pays the greater of adjusted principal and original principal.⁵ This does not guarantee a premium you paid in the secondary market.

Interim prices can still fall when real yields rise. An individual security’s maturity protection also does not transfer to the purchase price of a TIPS fund. U.S. inflation linkage is not protection against your particular Korean living costs.⁵³

Treasury FRNs offer a different structure: two-year floating-rate securities whose rate combines an index linked to thirteen-week bill auctions and a fixed spread, with quarterly interest payments.⁶ Rate resets change their role relative to fixed-rate long bonds. They do not eliminate currency exposure.

Spending in won adds another calculation

Foreign-asset returns and exchange rates jointly affect the result.⁷ Suppose the dollar investment earns 4%, while won per dollar falls from 1,400 to 1,260, a 10% decline. Assuming all dollar cash flows are converted at the end:

(1 + dollar return) × (ending KRW/USD ÷ starting KRW/USD) − 1
= 1.04 × 0.90 − 1
= −6.4%

If coupons were converted when received, calculate each conversion separately. Buying a Korean-listed ETF in won does not automatically hedge its foreign assets. Check the target currency and hedging policy in the documentation.

Currency hedging aims to reduce currency effects. It can involve costs and imperfect offsets, and it does not remove bond interest-rate risk. Fund derivative disclosures explain these distinctions.⁸

Six fields to complete

Do not apply one assumed tax rate indiscriminately when comparing individual bonds, U.S.-listed ETFs, and Korean-listed ETFs. Check the relevant product and account guidance separately. Calculations here are pretax. Understand the cash flows and tolerable price changes before choosing a structure around a tax slogan.

Read the series

1. Why a Treasury investment can lose money
2. Why long yields can rise when the Fed cuts
3. How Treasury yields reach the housing market
4. What to read before buying a Treasury
5. Choosing between bond ETFs, TIPS, and currency exposure
6. Build the bond plan before the rate forecast