IWD vs. TIP: What’s The Difference?

The iShares Russell 1000 Value ETF (IWD) and the iShares TIPS Bond ETF (TIP) are both among the Top 100 ETFs. IWD is a iShares Large Value fund and TIP is a iShares Inflation-Protected Bond fund. So, what’s the difference between IWD and TIP? And which fund is better?

IWD and TIP have the same expense ratio: 0.19%. IWD also has a high exposure to the financial services sector while TIP is mostly comprised of AAA bonds. Overall, IWD has provided higher returns than TIP over the past ten years.

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

Summary

IWD TIP
Name iShares Russell 1000 Value ETF iShares TIPS Bond ETF
Category Large Value Inflation-Protected Bond
Issuer iShares iShares
AUM 54.1B 28.3B
Avg. Return 11.40% 4.07%
Div. Yield 1.57% 1.87%
Expense Ratio 0.19% 0.19%

The iShares Russell 1000 Value ETF (IWD) is a Large Value fund that is issued by iShares. It currently has 54.1B total assets under management and has yielded an average annual return of 11.40% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.19%.

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%.

IWD’s dividend yield is 0.30% lower than that of TIP (1.57% vs. 1.87%). Also, IWD yielded on average 7.33% more per year over the past decade (11.40% vs. 4.07%). IWD and TIP have the same expense ratio: 0.19%.

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Fund Composition

Holdings

IWD - Holdings

IWD Holdings Weight
Berkshire Hathaway Inc Class B 2.58%
JPMorgan Chase & Co 2.25%
Johnson & Johnson 2.24%
UnitedHealth Group Inc 1.78%
Procter & Gamble Co 1.71%
The Walt Disney Co 1.5%
Bank of America Corp 1.43%
Comcast Corp Class A 1.33%
Exxon Mobil Corp 1.2%
Pfizer Inc 1.18%

IWD’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.58%, 2.25%, 2.24%, 1.78%, and 1.71%.

The Walt Disney Co (1.5%), Bank of America Corp (1.43%), and Comcast Corp Class A (1.33%) have a slightly smaller but still significant weight. Exxon Mobil Corp and Pfizer Inc are also represented in the IWD’s holdings at 1.2% and 1.18%.

TIP - Holdings

TIP Bond Sectors Weight
AAA 99.31%
Others 0.69%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

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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Risk Analysis

IWD TIP
Mean Return 1.03 0.28
R-squared 92.38 66.57
Std. Deviation 14.35 4.33
Alpha -3.23 -0.58
Beta 1.02 1.18
Sharpe Ratio 0.81 0.62
Treynor Ratio 11.06 2.24

The iShares Russell 1000 Value ETF (IWD) has a Mean Return of 1.03 with a Standard Deviation of 14.35 and a Beta of 1.02. Its Treynor Ratio is 11.06 while IWD’s Alpha is -3.23. Furthermore, the fund has a R-squared of 92.38 and a Sharpe Ratio of 0.81.

The iShares TIPS Bond ETF (TIP) has a Mean Return of 0.28 with a Sharpe Ratio of 0.62 and a Treynor Ratio of 2.24. Its Standard Deviation is 4.33 while TIP’s Beta is 1.18. Furthermore, the fund has a R-squared of 66.57 and a Alpha of -0.58.

IWD’s Mean Return is 0.75 points higher than that of TIP and its R-squared is 25.81 points higher. With a Standard Deviation of 14.35, IWD is slightly more volatile than TIP. The Alpha and Beta of IWD are 2.65 points lower and 0.16 points lower than TIP’s Alpha and Beta.

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Performance

Annual Returns

IWD vs. TIP - Annual Returns

Year IWD TIP
2020 2.67% 10.91%
2019 26.34% 8.28%
2018 -8.4% -1.43%
2017 13.47% 2.92%
2016 17.09% 4.56%
2015 -3.95% -1.59%
2014 13.21% 3.49%
2013 32.18% -8.65%
2012 17.28% 6.8%
2011 0.21% 13.4%
2010 15.3% 6.1%

IWD had its best year in 2013 with an annual return of 32.18%. IWD’s worst year over the past decade yielded -8.4% and occurred in 2018. In most years the iShares Russell 1000 Value ETF provided moderate returns such as in 2014, 2017, and 2010 where annual returns amounted to 13.21%, 13.47%, and 15.3% 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.

Portfolio Growth

IWD vs. TIP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWD $10,000 $30,746 11.40%
TIP $10,000 $15,229 4.07%

A $10,000 investment in IWD would have resulted in a final balance of $30,746. This is a profit of $20,746 over 11 years and amounts to a compound annual growth rate (CAGR) of 11.40%.

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%.

IWD’s CAGR is 7.33 percentage points higher than that of TIP and as a result, would have yielded $15,517 more on a $10,000 investment. Thus, IWD outperformed TIP by 7.33% annually.


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