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.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
|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%).
FYI: The best way I've found to invest is through M1 Finance. It's free and you even get an instant line of credit and 100$! Have a look here (link to M1 Finance).
|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.
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.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
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.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.