The iShares Core S&P Total U.S. Stock Market ETF (ITOT) and the iShares TIPS Bond ETF (TIP) are both among the Top 100 ETFs. ITOT is a iShares Large Blend fund and TIP is a iShares Inflation-Protected Bond fund. So, what’s the difference between ITOT and TIP? And which fund is better?
The expense ratio of ITOT is 0.16 percentage points lower than TIP’s (0.03% vs. 0.19%). ITOT also has a high exposure to the technology sector while TIP is mostly comprised of AAA bonds. Overall, ITOT has provided higher returns than TIP over the past ten years.
In this article, we’ll compare ITOT vs. TIP. We’ll look at holdings and risk metrics, as well as at their fund composition and portfolio growth. Moreover, I’ll also discuss ITOT’s and TIP’s industry exposure, performance, and annual returns and examine how these affect their overall returns.
|Name||iShares Core S&P Total U.S. Stock Market ETF||iShares TIPS Bond ETF|
|Category||Large Blend||Inflation-Protected Bond|
The iShares Core S&P Total U.S. Stock Market ETF (ITOT) is a Large Blend fund that is issued by iShares. It currently has 41.97B total assets under management and has yielded an average annual return of 14.59% over the past 10 years. The fund has a dividend yield of 1.2% with an expense ratio of 0.03%.
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%.
ITOT’s dividend yield is 0.67% lower than that of TIP (1.2% vs. 1.87%). Also, ITOT yielded on average 10.52% more per year over the past decade (14.59% vs. 4.07%). The expense ratio of ITOT is 0.16 percentage points lower than TIP’s (0.03% vs. 0.19%).
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|Facebook Inc Class A||1.89%|
|Alphabet Inc Class A||1.79%|
|Alphabet Inc Class C||1.71%|
|Berkshire Hathaway Inc Class B||1.17%|
|JPMorgan Chase & Co||1.02%|
ITOT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.07%, 4.75%, 3.16%, 1.89%, and 1.79%.
Alphabet Inc Class C (1.71%), Tesla Inc (1.17%), and Berkshire Hathaway Inc Class B (1.17%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ITOT’s holdings at 1.08% and 1.02%.
|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 iShares Core S&P Total U.S. Stock Market ETF (ITOT) has a Alpha of -0.54 with a Treynor Ratio of 14.13 and a Sharpe Ratio of 1.04. Its Mean Return is 1.27 while ITOT’s Standard Deviation is 14.02. Furthermore, the fund has a Beta of 1.03 and a R-squared of 99.4.
The iShares TIPS Bond ETF (TIP) has a Alpha of -0.58 with a Treynor Ratio of 2.24 and a Beta of 1.18. Its Mean Return is 0.28 while TIP’s Sharpe Ratio is 0.62. Furthermore, the fund has a Standard Deviation of 4.33 and a R-squared of 66.57.
ITOT’s Mean Return is 0.99 points higher than that of TIP and its R-squared is 32.83 points higher. With a Standard Deviation of 14.02, ITOT is slightly more volatile than TIP. The Alpha and Beta of ITOT are 0.04 points higher and 0.15 points lower than TIP’s Alpha and Beta.
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ITOT had its best year in 2013 with an annual return of 32.67%. ITOT’s worst year over the past decade yielded -5.27% and occurred in 2018. In most years the iShares Core S&P Total U.S. Stock Market ETF provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 13.01%, 15.98%, and 16.15% 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 ITOT would have resulted in a final balance of $42,310. This is a profit of $32,310 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.59%.
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%.
ITOT’s CAGR is 10.52 percentage points higher than that of TIP and as a result, would have yielded $27,081 more on a $10,000 investment. Thus, ITOT outperformed TIP by 10.52% annually.
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