IAU vs. VTIP: What’s The Difference?

The iShares Gold Trust (IAU) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. IAU is a iShares N/A fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between IAU and VTIP? And which fund is better?

The expense ratio of IAU is 0.20 percentage points higher than VTIP’s (0.25% vs. 0.05%). IAU also has a high exposure to the technology sector while VTIP is mostly comprised of AAA bonds. Overall, IAU has provided higher returns than VTIP over the past 7 years.

In this article, we’ll compare IAU 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 IAU’s and VTIP’s performance, fund composition, and industry exposure and examine how these affect their overall returns.

Summary

IAU VTIP
Name iShares Gold Trust Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares
Category N/A Inflation-Protected Bond
Issuer iShares Vanguard
AUM 28.61B 50.67B
Avg. Return 6.03% 1.79%
Div. Yield 0.0% 1.35%
Expense Ratio 0.25% 0.05%

The iShares Gold Trust (IAU) is a N/A fund that is issued by iShares. It currently has 28.61B total assets under management and has yielded an average annual return of 6.03% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.25%.

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%.

IAU’s dividend yield is 1.35% lower than that of VTIP (0.0% vs. 1.35%). Also, IAU yielded on average 4.24% more per year over the past decade (6.03% vs. 1.79%). The expense ratio of IAU is 0.20 percentage points higher than VTIP’s (0.25% vs. 0.05%).

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Fund Composition

Holdings

IAU - Holdings

IAU Holdings Weight
Gold 100.0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%
N/A 0%

IAU’s Top Holdings are Gold, N/A, N/A, N/A, and N/A at 100.0%, 0%, 0%, 0%, and 0%.

N/A (0%), N/A (0%), and N/A (0%) have a slightly smaller but still significant weight. N/A and N/A are also represented in the IAU’s holdings at 0% and 0%.

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.

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Risk Analysis

IAU VTIP
Mean Return 0.23 0
R-squared 16.03 0
Std. Deviation 16.97 0
Alpha 4.16 0
Beta 0.48 0
Sharpe Ratio 0.13 0
Treynor Ratio 1.5 0

The iShares Gold Trust (IAU) has a Alpha of 4.16 with a Beta of 0.48 and a Mean Return of 0.23. Its R-squared is 16.03 while IAU’s Standard Deviation is 16.97. Furthermore, the fund has a Sharpe Ratio of 0.13 and a Treynor Ratio of 1.5.

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

IAU’s Mean Return is 0.23 points higher than that of VTIP and its R-squared is 16.03 points higher. With a Standard Deviation of 16.97, IAU is slightly more volatile than VTIP. The Alpha and Beta of IAU are 4.16 points higher and 0.48 points higher than VTIP’s Alpha and Beta.

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Performance

Annual Returns

IAU vs. VTIP - Annual Returns

Year IAU VTIP
2020 23.86% 4.97%
2019 18.54% 4.83%
2018 -1.39% 0.54%
2017 11.58% 0.82%
2016 8.85% 2.71%
2015 -11.65% -0.15%
2014 -0.44% -1.17%
2013 -27.96% -1.55%
2012 8.37% 0.0%
2011 8.66% 0.0%
2010 27.93% 0.0%

IAU had its best year in 2010 with an annual return of 27.93%. IAU’s worst year over the past decade yielded -27.96% and occurred in 2013. In most years the iShares Gold Trust provided moderate returns such as in 2012, 2011, and 2016 where annual returns amounted to 8.37%, 8.66%, and 8.85% 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

IAU vs. VTIP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IAU $10,000 $15,467 6.03%
VTIP $10,000 $11,305 1.79%

A $10,000 investment in IAU would have resulted in a final balance of $15,467. This is a profit of $5,467 over 7 years and amounts to a compound annual growth rate (CAGR) of 6.03%.

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%.

IAU’s CAGR is 4.24 percentage points higher than that of VTIP and as a result, would have yielded $4,162 more on a $10,000 investment. Thus, IAU outperformed VTIP by 4.24% annually.


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