The iShares Russell 2000 ETF (IWM) and the iShares TIPS Bond ETF (TIP) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and TIP is a iShares Inflation-Protected Bond fund. So, what’s the difference between IWM and TIP? And which fund is better?
IWM and TIP have the same expense ratio: 0.19%. IWM also has a high exposure to the healthcare sector while TIP is mostly comprised of AAA bonds. Overall, IWM has provided higher returns than TIP over the past ten years.
In this article, we’ll compare IWM vs. TIP. We’ll look at portfolio growth and performance, as well as at their industry exposure and risk metrics. Moreover, I’ll also discuss IWM’s and TIP’s holdings, annual returns, and fund composition and examine how these affect their overall returns.
Summary
| IWM | TIP | |
| Name | iShares Russell 2000 ETF | iShares TIPS Bond ETF |
| Category | Small Blend | Inflation-Protected Bond |
| Issuer | iShares | iShares |
| AUM | 66.48B | 28.3B |
| Avg. Return | 13.52% | 4.07% |
| Div. Yield | 0.86% | 1.87% |
| Expense Ratio | 0.19% | 0.19% |
The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% 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%.
IWM’s dividend yield is 1.01% lower than that of TIP (0.86% vs. 1.87%). Also, IWM yielded on average 9.45% more per year over the past decade (13.52% vs. 4.07%). IWM and TIP have the same expense ratio: 0.19%.
Fund Composition
Holdings
| IWM Holdings | Weight |
| AMC Entertainment Holdings Inc Class A | 0.52% |
| Intellia Therapeutics Inc | 0.33% |
| Crocs Inc | 0.3% |
| BlackRock Cash Funds Treasury SL Agency | 0.29% |
| Tenet Healthcare Corp | 0.26% |
| Lattice Semiconductor Corp | 0.26% |
| Tetra Tech Inc | 0.25% |
| II-VI Inc | 0.25% |
| EastGroup Properties Inc | 0.24% |
| Arrowhead Pharmaceuticals Inc | 0.24% |
IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.
Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.
| 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.
Risk Analysis
| IWM | TIP | |
| Mean Return | 1.12 | 0.28 |
| R-squared | 77.73 | 66.57 |
| Std. Deviation | 18.87 | 4.33 |
| Alpha | -5.12 | -0.58 |
| Beta | 1.23 | 1.18 |
| Sharpe Ratio | 0.68 | 0.62 |
| Treynor Ratio | 9.56 | 2.24 |
The iShares Russell 2000 ETF (IWM) has a R-squared of 77.73 with a Treynor Ratio of 9.56 and a Alpha of -5.12. Its Beta is 1.23 while IWM’s Standard Deviation is 18.87. Furthermore, the fund has a Sharpe Ratio of 0.68 and a Mean Return of 1.12.
The iShares TIPS Bond ETF (TIP) has a Beta of 1.18 with a Treynor Ratio of 2.24 and a Standard Deviation of 4.33. Its Mean Return is 0.28 while TIP’s Sharpe Ratio is 0.62. Furthermore, the fund has a R-squared of 66.57 and a Alpha of -0.58.
IWM’s Mean Return is 0.84 points higher than that of TIP and its R-squared is 11.16 points higher. With a Standard Deviation of 18.87, IWM is slightly more volatile than TIP. The Alpha and Beta of IWM are 4.54 points lower and 0.05 points higher than TIP’s Alpha and Beta.
Performance
Annual Returns
| Year | IWM | TIP |
| 2020 | 19.89% | 10.91% |
| 2019 | 25.42% | 8.28% |
| 2018 | -11.02% | -1.43% |
| 2017 | 14.66% | 2.92% |
| 2016 | 21.36% | 4.56% |
| 2015 | -4.33% | -1.59% |
| 2014 | 4.94% | 3.49% |
| 2013 | 38.85% | -8.65% |
| 2012 | 16.39% | 6.8% |
| 2011 | -4.19% | 13.4% |
| 2010 | 26.76% | 6.1% |
IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% 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
| Fund | Initial Balance | Final Balance | CAGR |
| IWM | $10,000 | $36,686 | 13.52% |
| TIP | $10,000 | $15,229 | 4.07% |
A $10,000 investment in IWM would have resulted in a final balance of $36,686. This is a profit of $26,686 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.52%.
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%.
IWM’s CAGR is 9.45 percentage points higher than that of TIP and as a result, would have yielded $21,457 more on a $10,000 investment. Thus, IWM outperformed TIP by 9.45% annually.
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