TIP vs. ARKK: What’s The Difference?

The iShares TIPS Bond ETF (TIP) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between TIP and ARKK? And which fund is better?

The expense ratio of TIP is 0.56 percentage points lower than ARKK’s (0.19% vs. 0.75%). TIP is mostly comprised of AAA bonds while ARKK has a high exposure to the technology sector. Overall, TIP has provided lower returns than ARKK over the past ten years.

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

Summary

TIP ARKK
Name iShares TIPS Bond ETF ARK Innovation ETF
Category Inflation-Protected Bond Mid-Cap Growth
Issuer iShares ARK ETF Trust
AUM 28.3B 25.52B
Avg. Return 4.07% 55.45%
Div. Yield 1.87% 0.0%
Expense Ratio 0.19% 0.75%

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%.

The ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.

TIP’s dividend yield is 1.87% higher than that of ARKK (1.87% vs. 0.0%). Also, TIP yielded on average 51.38% less per year over the past decade (4.07% vs. 55.45%). The expense ratio of TIP is 0.56 percentage points lower than ARKK’s (0.19% vs. 0.75%).

Fund Composition

Holdings

TIP - Holdings

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.

ARKK - Holdings

ARKK Holdings Weight
Tesla Inc 9.56%
Roku Inc Class A 6.48%
Teladoc Health Inc 5.76%
Square Inc A 4.37%
Zoom Video Communications Inc 4.36%
Shopify Inc A 4.27%
Spotify Technology SA 3.68%
Twilio Inc A 3.66%
Coinbase Global Inc Ordinary Shares – Class A 3.65%
Unity Software Inc Ordinary Shares 3.41%

ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.

Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.

Risk Analysis

TIP ARKK
Mean Return 0.28 0
R-squared 66.57 0
Std. Deviation 4.33 0
Alpha -0.58 0
Beta 1.18 0
Sharpe Ratio 0.62 0
Treynor Ratio 2.24 0

The iShares TIPS Bond ETF (TIP) has a Sharpe Ratio of 0.62 with a Treynor Ratio of 2.24 and a Beta of 1.18. Its Alpha is -0.58 while TIP’s Standard Deviation is 4.33. Furthermore, the fund has a R-squared of 66.57 and a Mean Return of 0.28.

The ARK Innovation ETF (ARKK) has a Standard Deviation of 0 with a Beta of 0 and a Alpha of 0. Its Sharpe Ratio is 0 while ARKK’s R-squared is 0. Furthermore, the fund has a Mean Return of 0 and a Treynor Ratio of 0.

TIP’s Mean Return is 0.28 points higher than that of ARKK and its R-squared is 66.57 points higher. With a Standard Deviation of 4.33, TIP is slightly more volatile than ARKK. The Alpha and Beta of TIP are 0.58 points lower and 1.18 points higher than ARKK’s Alpha and Beta.

Performance

Annual Returns

TIP vs. ARKK - Annual Returns

Year TIP ARKK
2020 10.91% 152.52%
2019 8.28% 35.73%
2018 -1.43% 3.58%
2017 2.92% 87.38%
2016 4.56% -1.96%
2015 -1.59% 3.76%
2014 3.49% 0.0%
2013 -8.65% 0.0%
2012 6.8% 0.0%
2011 13.4% 0.0%
2010 6.1% 0.0%

TIP had its best year in 2011 with an annual return of 13.4%. TIP’s worst year over the past decade yielded -8.65% and occurred in 2013. In most years the iShares TIPS Bond ETF provided moderate returns such as in 2014, 2016, and 2010 where annual returns amounted to 3.49%, 4.56%, and 6.1% respectively.

The year 2020 was the strongest year for ARKK, returning 152.52% on an annual basis. The poorest year for ARKK in the last ten years was 2016, with a yield of -1.96%. Most years the ARK Innovation ETF has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 3.58% respectively.

Portfolio Growth

TIP vs. ARKK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $12,738 4.07%
ARKK $10,000 $65,218 55.45%

A $10,000 investment in TIP would have resulted in a final balance of $12,738. This is a profit of $2,738 over 5 years and amounts to a compound annual growth rate (CAGR) of 4.07%.

With a $10,000 investment in ARKK, the end total would have been $65,218. This equates to a $55,218 profit over 5 years and a compound annual growth rate (CAGR) of 55.45%.

TIP’s CAGR is 51.38 percentage points lower than that of ARKK and as a result, would have yielded $52,480 less on a $10,000 investment. Thus, TIP performed worse than ARKK by 51.38% annually.


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