The iShares TIPS Bond ETF (TIP) and the SPDR Dow Jones Industrial Average ETF Trust (DIA) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and DIA is a SPDR State Street Global Advisors Large Value fund. So, what’s the difference between TIP and DIA? And which fund is better?
The expense ratio of TIP is 0.03 percentage points higher than DIA’s (0.19% vs. 0.16%). TIP is mostly comprised of AAA bonds while DIA has a high exposure to the financial services sector. Overall, TIP has provided lower returns than DIA over the past ten years.
In this article, we’ll compare TIP vs. DIA. We’ll look at industry exposure and performance, as well as at their fund composition and holdings. Moreover, I’ll also discuss TIP’s and DIA’s risk metrics, portfolio growth, and annual returns and examine how these affect their overall returns.
|Name||iShares TIPS Bond ETF||SPDR Dow Jones Industrial Average ETF Trust|
|Category||Inflation-Protected Bond||Large Value|
|Issuer||iShares||SPDR State Street Global Advisors|
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 SPDR Dow Jones Industrial Average ETF Trust (DIA) is a Large Value fund that is issued by SPDR State Street Global Advisors. It currently has 30.46B total assets under management and has yielded an average annual return of 13.35% over the past 10 years. The fund has a dividend yield of 1.61% with an expense ratio of 0.16%.
TIP’s dividend yield is 0.26% higher than that of DIA (1.87% vs. 1.61%). Also, TIP yielded on average 9.28% less per year over the past decade (4.07% vs. 13.35%). The expense ratio of TIP is 0.03 percentage points higher than DIA’s (0.19% vs. 0.16%).
|TIP Bond Sectors||Weight|
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.
|UnitedHealth Group Inc||7.63%|
|Goldman Sachs Group Inc||7.23%|
|The Home Depot Inc||6.07%|
|Visa Inc Class A||4.45%|
|Honeywell International Inc||4.18%|
DIA’s Top Holdings are UnitedHealth Group Inc, Goldman Sachs Group Inc, The Home Depot Inc, Microsoft Corp, and Salesforce.com Inc at 7.63%, 7.23%, 6.07%, 5.16%, and 4.65%.
Amgen Inc (4.64%), Boeing Co (4.56%), and Visa Inc Class A (4.45%) have a slightly smaller but still significant weight. McDonald’s Corp and Honeywell International Inc are also represented in the DIA’s holdings at 4.4% and 4.18%.
The iShares TIPS Bond ETF (TIP) has a Sharpe Ratio of 0.62 with a Standard Deviation of 4.33 and a Beta of 1.18. Its Treynor Ratio is 2.24 while TIP’s R-squared is 66.57. Furthermore, the fund has a Alpha of -0.58 and a Mean Return of 0.28.
The SPDR Dow Jones Industrial Average ETF Trust (DIA) has a Standard Deviation of 13.68 with a Sharpe Ratio of 0.94 and a Alpha of -0.94. Its Mean Return is 1.13 while DIA’s Treynor Ratio is 13.07. Furthermore, the fund has a R-squared of 93.31 and a Beta of 0.97.
TIP’s Mean Return is 0.85 points lower than that of DIA and its R-squared is 26.74 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than DIA. The Alpha and Beta of TIP are 0.36 points higher and 0.21 points higher than DIA’s Alpha and Beta.
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 2013 was the strongest year for DIA, returning 29.41% on an annual basis. The poorest year for DIA in the last ten years was 2018, with a yield of -3.6%. Most years the SPDR Dow Jones Industrial Average ETF Trust has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 9.88%, 10.04%, and 13.87% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 DIA, the end total would have been $37,965. This equates to a $27,965 profit over 11 years and a compound annual growth rate (CAGR) of 13.35%.
TIP’s CAGR is 9.28 percentage points lower than that of DIA and as a result, would have yielded $22,736 less on a $10,000 investment. Thus, TIP performed worse than DIA by 9.28% annually.
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