Skip to content

IWM vs. VTIP: What’s The Difference?

The iShares Russell 2000 ETF (IWM) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between IWM and VTIP? And which fund is better?

Introduction To Mutual Funds
Introduction To Mutual Funds

The expense ratio of IWM is 0.14 percentage points higher than VTIP’s (0.19% vs. 0.05%). IWM also has a high exposure to the healthcare sector while VTIP is mostly comprised of AAA bonds. Overall, IWM has provided higher returns than VTIP over the past ten years.

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

TIP: Keep track of all your investments with Personal Capital. I use this amazing tool to aggregate all investments in one place and make sure I'm on track to financial freedom. Oh, and did I mention it's free? Try it out here (link to Personal Capital).

Summary

IWMVTIP
NameiShares Russell 2000 ETFVanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares
CategorySmall BlendInflation-Protected Bond
IssueriSharesVanguard
AUM66.48B50.67B
Avg. Return13.52%1.79%
Div. Yield0.86%1.35%
Expense Ratio0.19%0.05%

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 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%.

IWM’s dividend yield is 0.49% lower than that of VTIP (0.86% vs. 1.35%). Also, IWM yielded on average 11.73% more per year over the past decade (13.52% vs. 1.79%). The expense ratio of IWM is 0.14 percentage points higher than VTIP’s (0.19% vs. 0.05%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Holdings

IWM - Holdings

IWM HoldingsWeight
AMC Entertainment Holdings Inc Class A0.52%
Intellia Therapeutics Inc0.33%
Crocs Inc0.3%
BlackRock Cash Funds Treasury SL Agency0.29%
Tenet Healthcare Corp0.26%
Lattice Semiconductor Corp0.26%
Tetra Tech Inc0.25%
II-VI Inc0.25%
EastGroup Properties Inc0.24%
Arrowhead Pharmaceuticals Inc0.24%

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%.

VTIP - Holdings

VTIP Bond SectorsWeight
AAA99.87%
Others0.13%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

IWMVTIP
Mean Return1.120
R-squared77.730
Std. Deviation18.870
Alpha-5.120
Beta1.230
Sharpe Ratio0.680
Treynor Ratio9.560

The iShares Russell 2000 ETF (IWM) has a R-squared of 77.73 with a Treynor Ratio of 9.56 and a Standard Deviation of 18.87. Its Sharpe Ratio is 0.68 while IWM’s Alpha is -5.12. Furthermore, the fund has a Mean Return of 1.12 and a Beta of 1.23.

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

IWM’s Mean Return is 1.12 points higher than that of VTIP and its R-squared is 77.73 points higher. With a Standard Deviation of 18.87, IWM is slightly more volatile than VTIP. The Alpha and Beta of IWM are 5.12 points lower and 1.23 points higher than VTIP’s Alpha and Beta.

FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!

Performance

Annual Returns

IWM vs. VTIP - Annual Returns

YearIWMVTIP
202019.89%4.97%
201925.42%4.83%
2018-11.02%0.54%
201714.66%0.82%
201621.36%2.71%
2015-4.33%-0.15%
20144.94%-1.17%
201338.85%-1.55%
201216.39%0.0%
2011-4.19%0.0%
201026.76%0.0%

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 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

IWM vs. VTIP - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWM$10,000$18,69113.52%
VTIP$10,000$11,3051.79%

A $10,000 investment in IWM would have resulted in a final balance of $18,691. This is a profit of $8,691 over 7 years and amounts to a compound annual growth rate (CAGR) of 13.52%.

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%.

IWM’s CAGR is 11.73 percentage points higher than that of VTIP and as a result, would have yielded $7,386 more on a $10,000 investment. Thus, IWM outperformed VTIP by 11.73% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!

2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.

5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply

Your email address will not be published.