TIP vs. BIV: What’s The Difference?

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

The expense ratio of TIP is 0.14 percentage points higher than BIV’s (0.19% vs. 0.05%). TIP is mostly comprised of AAA bonds and BIV has a high exposure to AAA bond. Overall, TIP has provided lower returns than BIV over the past ten years.

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

Summary

TIP BIV
Name iShares TIPS Bond ETF Vanguard Intermediate-Term Bond Index Fund ETF Shares
Category Inflation-Protected Bond Intermediate-Term Bond
Issuer iShares Vanguard
AUM 28.3B 39.05B
Avg. Return 4.07% 5.31%
Div. Yield 1.87% 2.06%
Expense Ratio 0.19% 0.05%

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 Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) is a Intermediate-Term Bond fund that is issued by Vanguard. It currently has 39.05B total assets under management and has yielded an average annual return of 5.31% over the past 10 years. The fund has a dividend yield of 2.06% with an expense ratio of 0.05%.

TIP’s dividend yield is 0.19% lower than that of BIV (1.87% vs. 2.06%). Also, TIP yielded on average 1.24% less per year over the past decade (4.07% vs. 5.31%). The expense ratio of TIP is 0.14 percentage points higher than BIV’s (0.19% vs. 0.05%).

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.

BIV - Holdings

BIV Bond Sectors Weight
AAA 54.51%
BBB 25.24%
A 16.97%
AA 3.1%
Others 0.15%
Below B 0.03%
B 0.0%
BB 0.0%
US Government 0.0%

BIV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 54.51%, 25.24%, 16.97%, 3.1%, and 0.15%. The fund is less weighted towards Below B (0.03%), B (0.0%), and BB (0.0%) rated bonds.

Risk Analysis

TIP BIV
Mean Return 0.28 0.35
R-squared 66.57 95.12
Std. Deviation 4.33 4.09
Alpha -0.58 -0.07
Beta 1.18 1.33
Sharpe Ratio 0.62 0.89
Treynor Ratio 2.24 2.72

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

The Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) has a Sharpe Ratio of 0.89 with a Standard Deviation of 4.09 and a Mean Return of 0.35. Its Treynor Ratio is 2.72 while BIV’s Beta is 1.33. Furthermore, the fund has a Alpha of -0.07 and a R-squared of 95.12.

TIP’s Mean Return is 0.07 points lower than that of BIV and its R-squared is 28.55 points lower. With a Standard Deviation of 4.33, TIP is slightly more volatile than BIV. The Alpha and Beta of TIP are 0.51 points lower and 0.15 points lower than BIV’s Alpha and Beta.

Performance

Annual Returns

TIP vs. BIV - Annual Returns

Year TIP BIV
2020 10.91% 9.71%
2019 8.28% 10.19%
2018 -1.43% -0.09%
2017 2.92% 3.8%
2016 4.56% 2.86%
2015 -1.59% 1.23%
2014 3.49% 7.0%
2013 -8.65% -3.44%
2012 6.8% 7.02%
2011 13.4% 10.62%
2010 6.1% 9.55%

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 2011 was the strongest year for BIV, returning 10.62% on an annual basis. The poorest year for BIV in the last ten years was 2013, with a yield of -3.44%. Most years the Vanguard Intermediate-Term Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 3.8%, 7.0%, and 7.02% respectively.

Portfolio Growth

TIP vs. BIV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $15,229 4.07%
BIV $10,000 $17,492 5.31%

A $10,000 investment in TIP would have resulted in a final balance of $15,229. This is a profit of $5,229 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.07%.

With a $10,000 investment in BIV, the end total would have been $17,492. This equates to a $7,492 profit over 11 years and a compound annual growth rate (CAGR) of 5.31%.

TIP’s CAGR is 1.24 percentage points lower than that of BIV and as a result, would have yielded $2,263 less on a $10,000 investment. Thus, TIP performed worse than BIV by 1.24% annually.


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