IWB vs. VTIP: What’s The Difference?

The iShares Russell 1000 ETF (IWB) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. IWB is a iShares Large Blend fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between IWB and VTIP? And which fund is better?

The expense ratio of IWB is 0.10 percentage points higher than VTIP’s (0.15% vs. 0.05%). IWB also has a high exposure to the technology sector while VTIP is mostly comprised of AAA bonds. Overall, IWB has provided higher returns than VTIP over the past ten years.

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

Summary

IWB VTIP
Name iShares Russell 1000 ETF Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares
Category Large Blend Inflation-Protected Bond
Issuer iShares Vanguard
AUM 30.54B 50.67B
Avg. Return 14.64% 1.79%
Div. Yield 1.14% 1.35%
Expense Ratio 0.15% 0.05%

The iShares Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.

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%.

IWB’s dividend yield is 0.21% lower than that of VTIP (1.14% vs. 1.35%). Also, IWB yielded on average 12.84% more per year over the past decade (14.64% vs. 1.79%). The expense ratio of IWB is 0.10 percentage points higher than VTIP’s (0.15% vs. 0.05%).

Fund Composition

Holdings

IWB - Holdings

IWB Holdings Weight
Apple Inc 5.45%
Microsoft Corp 5.11%
Amazon.com Inc 3.43%
Facebook Inc Class A 2.03%
Alphabet Inc Class A 1.93%
Alphabet Inc Class C 1.82%
Tesla Inc 1.27%
Berkshire Hathaway Inc Class B 1.24%
NVIDIA Corp 1.11%
JPMorgan Chase & Co 1.09%

IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.

Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.

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

IWB VTIP
Mean Return 1.27 0
R-squared 99.73 0
Std. Deviation 13.87 0
Alpha -0.38 0
Beta 1.02 0
Sharpe Ratio 1.05 0
Treynor Ratio 14.31 0

The iShares Russell 1000 ETF (IWB) has a Sharpe Ratio of 1.05 with a R-squared of 99.73 and a Standard Deviation of 13.87. Its Beta is 1.02 while IWB’s Treynor Ratio is 14.31. Furthermore, the fund has a Mean Return of 1.27 and a Alpha of -0.38.

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

IWB’s Mean Return is 1.27 points higher than that of VTIP and its R-squared is 99.73 points higher. With a Standard Deviation of 13.87, IWB is slightly more volatile than VTIP. The Alpha and Beta of IWB are 0.38 points lower and 1.02 points higher than VTIP’s Alpha and Beta.

Performance

Annual Returns

IWB vs. VTIP - Annual Returns

Year IWB VTIP
2020 20.8% 4.97%
2019 31.26% 4.83%
2018 -4.91% 0.54%
2017 21.53% 0.82%
2016 11.91% 2.71%
2015 0.82% -0.15%
2014 13.08% -1.17%
2013 32.93% -1.55%
2012 16.27% 0.0%
2011 1.36% 0.0%
2010 15.94% 0.0%

IWB had its best year in 2013 with an annual return of 32.93%. IWB’s worst year over the past decade yielded -4.91% and occurred in 2018. In most years the iShares Russell 1000 ETF provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.08%, 15.94%, and 16.27% 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

IWB vs. VTIP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWB $10,000 $23,378 14.64%
VTIP $10,000 $11,305 1.79%

A $10,000 investment in IWB would have resulted in a final balance of $23,378. This is a profit of $13,378 over 7 years and amounts to a compound annual growth rate (CAGR) of 14.64%.

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%.

IWB’s CAGR is 12.84 percentage points higher than that of VTIP and as a result, would have yielded $12,073 more on a $10,000 investment. Thus, IWB outperformed VTIP by 12.84% annually.


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