The iShares MSCI USA Quality Factor ETF (QUAL) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. QUAL is a iShares Large Blend fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between QUAL and VTIP? And which fund is better?
The expense ratio of QUAL is 0.10 percentage points higher than VTIP’s (0.15% vs. 0.05%). QUAL also has a high exposure to the technology sector while VTIP is mostly comprised of AAA bonds. Overall, QUAL has provided higher returns than VTIP over the past 7 years.
In this article, we’ll compare QUAL vs. VTIP. We’ll look at industry exposure and holdings, as well as at their annual returns and fund composition. Moreover, I’ll also discuss QUAL’s and VTIP’s risk metrics, performance, and portfolio growth and examine how these affect their overall returns.
|Name||iShares MSCI USA Quality Factor ETF||Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares|
|Category||Large Blend||Inflation-Protected Bond|
The iShares MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% 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%.
QUAL’s dividend yield is 0.06% lower than that of VTIP (1.29% vs. 1.35%). Also, QUAL yielded on average 11.63% more per year over the past decade (13.42% vs. 1.79%). The expense ratio of QUAL is 0.10 percentage points higher than VTIP’s (0.15% vs. 0.05%).
|Facebook Inc Class A||4.77%|
|Nike Inc Class B||4.05%|
|Johnson & Johnson||2.99%|
|Mastercard Inc Class A||2.72%|
|Alphabet Inc Class A||2.49%|
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
|VTIP Bond Sectors||Weight|
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.
The iShares MSCI USA Quality Factor ETF (QUAL) has a Mean Return of 0 with a Sharpe Ratio of 0 and a Alpha of 0. Its Standard Deviation is 0 while QUAL’s Treynor Ratio is 0. Furthermore, the fund has a Beta of 0 and a R-squared of 0.
The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a Beta of 0 with a Alpha of 0 and a Sharpe Ratio of 0. Its Treynor Ratio is 0 while VTIP’s Standard Deviation is 0. Furthermore, the fund has a Mean Return of 0 and a R-squared of 0.
QUAL’s Mean Return is 0.00 points lower than that of VTIP and its R-squared is 0.00 points lower. With a Standard Deviation of 0, QUAL is slightly less volatile than VTIP. The Alpha and Beta of QUAL are 0.00 points lower and 0.00 points lower than VTIP’s Alpha and Beta.
QUAL had its best year in 2019 with an annual return of 34.14%. QUAL’s worst year over the past decade yielded -5.77% and occurred in 2018. In most years the iShares MSCI USA Quality Factor ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 5.56%, and 9.18% 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in QUAL would have resulted in a final balance of $23,251. This is a profit of $13,251 over 7 years and amounts to a compound annual growth rate (CAGR) of 13.42%.
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%.
QUAL’s CAGR is 11.63 percentage points higher than that of VTIP and as a result, would have yielded $11,946 more on a $10,000 investment. Thus, QUAL outperformed VTIP by 11.63% annually.
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