PORTFOLIO COMPARISON / ONE VARIABLE

Short vs Long Duration Bond Portfolio Backtest

Change bond duration inside a multi-asset portfolio and measure the effect across inflation and recession regimes.

Fixed-income comparisonCommon rate-risk questionTreasury-duration testHistorical result available

HISTORICAL BACKTEST RESULT

60% VTI / 40% BND vs 60% VTI / 40% TLT

60% VTI / 40% BND 60% VTI / 40% TLT
2020-06-02 → 2026-07-31 · 1541 common sessions
60% VTI / 40% BND$15,9787.9% annualized · -22.8% max drawdown
60% VTI / 40% TLT$13,3694.8% annualized · -29.3% max drawdown

Historical calculation from cached Marketstack EOD data. Annual rebalancing, $10,000 initial value, nominal USD before fees and taxes. The disclosed portfolio definitions—not an AI model—produce the result.

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WHAT TO COMPARE

Read the trade-off as a system.

  1. 01Portfolio drawdown
  2. 02Rate sensitivity
  3. 03Volatility
  4. 04Diversification benefit

WHEN TO LOOK

Locate where the difference appeared.

DisinflationRising-rate cyclesRecessionsInflation shocks

A useful comparison shows whether an advantage was broad or created by one unusually favorable period. Review the portfolio backtest methodology to understand how the same rules are applied across a shared data window.

OBSERVED RESULT / REAL MARKET DATA

What the comparison actually produced.

The short-duration sleeve produced the highest ending value and the shallowest drawdown. Long-duration Treasuries finished $3,326 below the BND baseline and had a 6.48-point deeper drawdown, largely reflecting the 2022 rate shock.

WINDOWAug 2016–Jul 2026
CAPITAL$10,000 initial investment
CALCULATIONAll variants keep 60% VTI and change only the 40% bond proxy: BND, SHY, or TLT. Target weights are restored annually.
Bond sleeveEnding valueAnnualized returnMaximum drawdown
BND aggregate bonds$24,6429.44%−21.76%
SHY short Treasuries$25,0329.61%−20.50%
TLT long Treasuries$21,3167.87%−28.24%

STRATEGY CONTEXT

What this portfolio strategy means.

A short definition, the reason investors return to it, and the historical context behind the name. It is context for a backtest—not an investment recommendation.

What it is

This test compares shorter-duration and longer-duration Treasury exposure inside an otherwise fixed portfolio. Duration is a measure of a bond or fund’s sensitivity to interest-rate changes: longer-duration holdings usually move more when yields change. The page therefore examines a risk source inside the bond sleeve rather than treating all bonds as interchangeable stabilizers.

Why investors use it

Investors use shorter Treasuries for lower rate sensitivity and liquidity, while longer Treasuries are often chosen for higher yield exposure and a potentially stronger response when rates fall. The controlled comparison makes the cost visible: the same protective bond allocation can behave very differently during rising-rate periods, equity stress, and disinflationary growth shocks.

Historical context

US Treasury securities have long served as common building blocks for cash management and diversified portfolios. The rise of bond ETFs made duration a simpler retail choice, but it also made the distinction easy to overlook. The 2022 rate shock renewed attention on the fact that high-quality bonds can still experience material price declines when yields rise quickly.