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MBB vs. VTIP: What’s The Difference?

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

The expense ratio of MBB is 0.01 percentage points higher than VTIP’s (0.06% vs. 0.05%). MBB is mostly comprised of AAA bonds and VTIP has a high exposure to AAA bond. Overall, MBB has provided higher returns than VTIP over the past 7 years.

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

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Summary

MBBVTIP
NameiShares MBS ETFVanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares
CategoryIntermediate GovernmentInflation-Protected Bond
IssueriSharesVanguard
AUM25.69B50.67B
Avg. Return3.08%1.79%
Div. Yield1.88%1.35%
Expense Ratio0.06%0.05%

The iShares MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.

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%.

MBB’s dividend yield is 0.53% higher than that of VTIP (1.88% vs. 1.35%). Also, MBB yielded on average 1.28% more per year over the past decade (3.08% vs. 1.79%). The expense ratio of MBB is 0.01 percentage points higher than VTIP’s (0.06% vs. 0.05%).

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Fund Composition

Holdings

MBB - Holdings

MBB Bond SectorsWeight
AAA99.51%
Others0.49%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 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.

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.

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Risk Analysis

MBBVTIP
Mean Return0.20
R-squared74.380
Std. Deviation2.120
Alpha0.140
Beta0.60
Sharpe Ratio0.870
Treynor Ratio3.020

The iShares MBS ETF (MBB) has a Mean Return of 0.2 with a Standard Deviation of 2.12 and a Sharpe Ratio of 0.87. Its R-squared is 74.38 while MBB’s Alpha is 0.14. Furthermore, the fund has a Treynor Ratio of 3.02 and a Beta of 0.6.

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

MBB’s Mean Return is 0.20 points higher than that of VTIP and its R-squared is 74.38 points higher. With a Standard Deviation of 2.12, MBB is slightly more volatile than VTIP. The Alpha and Beta of MBB are 0.14 points higher and 0.60 points higher than VTIP’s Alpha and Beta.

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Performance

Annual Returns

MBB vs. VTIP - Annual Returns

YearMBBVTIP
20204.03%4.97%
20196.27%4.83%
20180.81%0.54%
20172.37%0.82%
20161.28%2.71%
20151.28%-0.15%
20146.16%-1.17%
2013-1.92%-1.55%
20122.23%0.0%
20115.88%0.0%
20105.44%0.0%

MBB had its best year in 2019 with an annual return of 6.27%. MBB’s worst year over the past decade yielded -1.92% and occurred in 2013. In most years the iShares MBS ETF provided moderate returns such as in 2012, 2017, and 2020 where annual returns amounted to 2.23%, 2.37%, and 4.03% 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

MBB vs. VTIP - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
MBB$10,000$12,4233.08%
VTIP$10,000$11,3051.79%

A $10,000 investment in MBB would have resulted in a final balance of $12,423. This is a profit of $2,423 over 7 years and amounts to a compound annual growth rate (CAGR) of 3.08%.

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%.

MBB’s CAGR is 1.28 percentage points higher than that of VTIP and as a result, would have yielded $1,118 more on a $10,000 investment. Thus, MBB outperformed VTIP by 1.28% annually.


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