The SPDR S&P 500 ETF Trust (SPY) and the iShares TIPS Bond ETF (TIP) are both among the Top 100 ETFs. SPY is a SPDR State Street Global Advisors Large Blend fund and TIP is a iShares Inflation-Protected Bond fund. So, what’s the difference between SPY and TIP? And which fund is better?
The expense ratio of SPY is 0.10 percentage points lower than TIP’s (0.09% vs. 0.19%). SPY also has a high exposure to the technology sector while TIP is mostly comprised of AAA bonds. Overall, SPY has provided higher returns than TIP over the past ten years.
In this article, we’ll compare SPY vs. TIP. We’ll look at risk metrics and portfolio growth, as well as at their holdings and industry exposure. Moreover, I’ll also discuss SPY’s and TIP’s annual returns, fund composition, and performance and examine how these affect their overall returns.
Also see SPY vs. TQQQ for another great set of funds to own and build wealth.
Summary
| SPY | TIP | |
| Name | SPDR S&P 500 ETF Trust | iShares TIPS Bond ETF |
| Category | Large Blend | Inflation-Protected Bond |
| Issuer | SPDR State Street Global Advisors | iShares |
| AUM | 374.03B | 28.3B |
| Avg. Return | 14.41% | 4.07% |
| Div. Yield | 1.3% | 1.87% |
| Expense Ratio | 0.09% | 0.19% |
The SPDR S&P 500 ETF Trust (SPY) is a Large Blend fund that is issued by SPDR State Street Global Advisors. It currently has 374.03B total assets under management and has yielded an average annual return of 14.41% over the past 10 years. The fund has a dividend yield of 1.3% with an expense ratio of 0.09%.
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%.
Another great SPY comparison is SPY vs. PFF.
SPY’s dividend yield is 0.57% lower than that of TIP (1.3% vs. 1.87%). Also, SPY yielded on average 10.34% more per year over the past decade (14.41% vs. 4.07%). The expense ratio of SPY is 0.10 percentage points lower than TIP’s (0.09% vs. 0.19%).
Fund Composition
Holdings
| SPY Holdings | Weight |
| Apple Inc | 5.9% |
| Microsoft Corp | 5.6% |
| Amazon.com Inc | 4.05% |
| Facebook Inc A | 2.29% |
| Alphabet Inc A | 2.02% |
| Alphabet Inc Class C | 1.96% |
| Berkshire Hathaway Inc Class B | 1.45% |
| Tesla Inc | 1.44% |
| NVIDIA Corp | 1.37% |
| JPMorgan Chase & Co | 1.29% |
SPY’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 5.9%, 5.6%, 4.05%, 2.29%, and 2.02%.
Alphabet Inc Class C (1.96%), Berkshire Hathaway Inc Class B (1.45%), and Tesla Inc (1.44%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SPY’s holdings at 1.37% and 1.29%.
| 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
| SPY | TIP | |
| Mean Return | 1.23 | 0.28 |
| R-squared | 100 | 66.57 |
| Std. Deviation | 13.56 | 4.33 |
| Alpha | -0.09 | -0.58 |
| Beta | 1 | 1.18 |
| Sharpe Ratio | 1.04 | 0.62 |
| Treynor Ratio | 14.12 | 2.24 |
The SPDR S&P 500 ETF Trust (SPY) has a Alpha of -0.09 with a Treynor Ratio of 14.12 and a Standard Deviation of 13.56. Its Mean Return is 1.23 while SPY’s Sharpe Ratio is 1.04. Furthermore, the fund has a Beta of 1 and a R-squared of 100.
The iShares TIPS Bond ETF (TIP) has a Sharpe Ratio of 0.62 with a Mean Return of 0.28 and a R-squared of 66.57. Its Beta is 1.18 while TIP’s Standard Deviation is 4.33. Furthermore, the fund has a Alpha of -0.58 and a Treynor Ratio of 2.24.
I have a related article on SPY vs. MUB that has a lot of similar break downs.
SPY’s Mean Return is 0.95 points higher than that of TIP and its R-squared is 33.43 points higher. With a Standard Deviation of 13.56, SPY is slightly more volatile than TIP. The Alpha and Beta of SPY are 0.49 points higher and 0.18 points lower than TIP’s Alpha and Beta.
Performance
Annual Returns
| Year | SPY | TIP |
| 2020 | 18.25% | 10.91% |
| 2019 | 31.29% | 8.28% |
| 2018 | -4.45% | -1.43% |
| 2017 | 21.69% | 2.92% |
| 2016 | 11.8% | 4.56% |
| 2015 | 1.34% | -1.59% |
| 2014 | 13.53% | 3.49% |
| 2013 | 32.21% | -8.65% |
| 2012 | 15.84% | 6.8% |
| 2011 | 2.06% | 13.4% |
| 2010 | 14.93% | 6.1% |
SPY had its best year in 2013 with an annual return of 32.21%. SPY’s worst year over the past decade yielded -4.45% and occurred in 2018. In most years the SPDR S&P 500 ETF Trust provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.53%, 14.93%, and 15.84% respectively.
See SPY vs. XFL if you want to add more ETF’s to your portfolio.
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 |
| SPY | $10,000 | $41,712 | 14.41% |
| TIP | $10,000 | $15,229 | 4.07% |
A $10,000 investment in SPY would have resulted in a final balance of $41,712. This is a profit of $31,712 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.41%.
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%.
If you still want to see how SPY stacks up to other competition check out SPY v. ARKK.
SPY’s CAGR is 10.34 percentage points higher than that of TIP and as a result, would have yielded $26,483 more on a $10,000 investment. Thus, SPY outperformed TIP by 10.34% annually.
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