EMB vs. VTIP: What’s The Difference?

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. EMB is a iShares Emerging Markets Bond fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between EMB and VTIP? And which fund is better?

The expense ratio of EMB is 0.34 percentage points higher than VTIP’s (0.39% vs. 0.05%). EMB is mostly comprised of BBB bonds and VTIP has a high exposure to AAA bond. Overall, EMB has provided higher returns than VTIP over the past 7 years.

In this article, we’ll compare EMB vs. VTIP. We’ll look at risk metrics and portfolio growth, as well as at their holdings and annual returns. Moreover, I’ll also discuss EMB’s and VTIP’s industry exposure, performance, and fund composition and examine how these affect their overall returns.

Summary

EMB VTIP
Name iShares J.P. Morgan USD Emerging Markets Bond ETF Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares
Category Emerging Markets Bond Inflation-Protected Bond
Issuer iShares Vanguard
AUM 19.76B 50.67B
Avg. Return 6.43% 1.79%
Div. Yield 3.85% 1.35%
Expense Ratio 0.39% 0.05%

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.

EMB’s dividend yield is 2.50% higher than that of VTIP (3.85% vs. 1.35%). Also, EMB yielded on average 4.64% more per year over the past decade (6.43% vs. 1.79%). The expense ratio of EMB is 0.34 percentage points higher than VTIP’s (0.39% vs. 0.05%).

Fund Composition

Holdings

EMB - Holdings

EMB Bond Sectors Weight
BBB 33.79%
B 21.97%
BB 16.92%
A 13.67%
AA 7.97%
Below B 4.49%
Others 1.11%
AAA 0.09%
US Government 0.0%

EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.

VTIP - Holdings

VTIP Bond Sectors Weight
AAA 99.87%
Others 0.13%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 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.

Risk Analysis

EMB VTIP
Mean Return 0.44 0
R-squared 23.34 0
Std. Deviation 8.44 0
Alpha 0.89 0
Beta 1.36 0
Sharpe Ratio 0.55 0
Treynor Ratio 3.24 0

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Beta of 1.36 with a R-squared of 23.34 and a Sharpe Ratio of 0.55. Its Mean Return is 0.44 while EMB’s Treynor Ratio is 3.24. Furthermore, the fund has a Alpha of 0.89 and a Standard Deviation of 8.44.

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a Beta of 0 with a Sharpe Ratio of 0 and a R-squared of 0. Its Standard Deviation is 0 while VTIP’s Mean Return is 0. Furthermore, the fund has a Alpha of 0 and a Treynor Ratio of 0.

EMB’s Mean Return is 0.44 points higher than that of VTIP and its R-squared is 23.34 points higher. With a Standard Deviation of 8.44, EMB is slightly more volatile than VTIP. The Alpha and Beta of EMB are 0.89 points higher and 1.36 points higher than VTIP’s Alpha and Beta.

Performance

Annual Returns

EMB vs. VTIP - Annual Returns

Year EMB VTIP
2020 5.48% 4.97%
2019 15.57% 4.83%
2018 -5.67% 0.54%
2017 9.98% 0.82%
2016 9.41% 2.71%
2015 0.43% -0.15%
2014 6.69% -1.17%
2013 -7.42% -1.55%
2012 17.64% 0.0%
2011 7.2% 0.0%
2010 11.47% 0.0%

EMB had its best year in 2012 with an annual return of 17.64%. EMB’s worst year over the past decade yielded -7.42% and occurred in 2013. In most years the iShares J.P. Morgan USD Emerging Markets Bond ETF provided moderate returns such as in 2014, 2011, and 2016 where annual returns amounted to 6.69%, 7.2%, and 9.41% respectively.

The year 2020 was the strongest year for VTIP, returning 4.97% on an annual basis. The poorest year for VTIP in the last ten years was 2013, with a yield of -1.55%. Most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 0.54% respectively.

Portfolio Growth

EMB vs. VTIP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EMB $10,000 $14,825 6.43%
VTIP $10,000 $11,305 1.79%

A $10,000 investment in EMB would have resulted in a final balance of $14,825. This is a profit of $4,825 over 7 years and amounts to a compound annual growth rate (CAGR) of 6.43%.

With a $10,000 investment in VTIP, the end total would have been $11,305. This equates to a $1,305 profit over 7 years and a compound annual growth rate (CAGR) of 1.79%.

EMB’s CAGR is 4.64 percentage points higher than that of VTIP and as a result, would have yielded $3,520 more on a $10,000 investment. Thus, EMB outperformed VTIP by 4.64% annually.


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