The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) and the iShares TIPS Bond ETF (TIP) are both among the Top 100 ETFs. BSV is a Vanguard Short-Term Bond fund and TIP is a iShares Inflation-Protected Bond fund. So, what’s the difference between BSV and TIP? And which fund is better?
The expense ratio of BSV is 0.14 percentage points lower than TIP’s (0.05% vs. 0.19%). BSV is mostly comprised of AAA bonds and TIP has a high exposure to AAA bond. Overall, BSV has provided lower returns than TIP over the past ten years.
In this article, we’ll compare BSV vs. TIP. We’ll look at industry exposure and risk metrics, as well as at their annual returns and portfolio growth. Moreover, I’ll also discuss BSV’s and TIP’s performance, fund composition, and holdings and examine how these affect their overall returns.
|Name||Vanguard Short-Term Bond Index Fund ETF Shares||iShares TIPS Bond ETF|
|Category||Short-Term Bond||Inflation-Protected Bond|
The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) is a Short-Term Bond fund that is issued by Vanguard. It currently has 67.71B total assets under management and has yielded an average annual return of 2.27% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.05%.
The iShares TIPS Bond ETF (TIP) is a Inflation-Protected Bond fund that is issued by iShares. It currently has 28.3B total assets under management and has yielded an average annual return of 4.07% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.19%.
BSV’s dividend yield is 0.39% lower than that of TIP (1.48% vs. 1.87%). Also, BSV yielded on average 1.80% less per year over the past decade (2.27% vs. 4.07%). The expense ratio of BSV is 0.14 percentage points lower than TIP’s (0.05% vs. 0.19%).
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|BSV Bond Sectors||Weight|
BSV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 71.65%, 13.08%, 11.95%, 3.28%, and 0.03%. The fund is less weighted towards Below B (0.01%), B (0.0%), and BB (0.0%) rated bonds.
|TIP Bond Sectors||Weight|
TIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.31%, 0.69%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
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The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) has a Sharpe Ratio of 0.98 with a Beta of 0.38 and a R-squared of 78.38. Its Mean Return is 0.16 while BSV’s Alpha is 0.21. Furthermore, the fund has a Treynor Ratio of 3.33 and a Standard Deviation of 1.33.
The iShares TIPS Bond ETF (TIP) has a Mean Return of 0.28 with a Standard Deviation of 4.33 and a Beta of 1.18. Its Sharpe Ratio is 0.62 while TIP’s Alpha is -0.58. Furthermore, the fund has a Treynor Ratio of 2.24 and a R-squared of 66.57.
BSV’s Mean Return is 0.12 points lower than that of TIP and its R-squared is 11.81 points higher. With a Standard Deviation of 1.33, BSV is slightly less volatile than TIP. The Alpha and Beta of BSV are 0.79 points higher and 0.80 points lower than TIP’s Alpha and Beta.
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BSV had its best year in 2019 with an annual return of 4.92%. BSV’s worst year over the past decade yielded 0.17% and occurred in 2013. In most years the Vanguard Short-Term Bond Index Fund ETF Shares provided moderate returns such as in 2018, 2016, and 2012 where annual returns amounted to 1.34%, 1.42%, and 1.98% respectively.
The year 2011 was the strongest year for TIP, returning 13.4% on an annual basis. The poorest year for TIP in the last ten years was 2013, with a yield of -8.65%. Most years the iShares TIPS Bond ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were 3.49%, 4.56%, and 6.1% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in BSV would have resulted in a final balance of $12,785. This is a profit of $2,785 over 11 years and amounts to a compound annual growth rate (CAGR) of 2.27%.
With a $10,000 investment in TIP, the end total would have been $15,229. This equates to a $5,229 profit over 11 years and a compound annual growth rate (CAGR) of 4.07%.
BSV’s CAGR is 1.80 percentage points lower than that of TIP and as a result, would have yielded $2,444 less on a $10,000 investment. Thus, BSV performed worse than TIP by 1.80% annually.
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