The iShares TIPS Bond ETF (TIP) and the iShares Gold Trust (IAU) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and IAU is a iShares N/A fund. So, what’s the difference between TIP and IAU? And which fund is better?
The expense ratio of TIP is 0.06 percentage points lower than IAU’s (0.19% vs. 0.25%). TIP is mostly comprised of AAA bonds while IAU has a high exposure to the technology sector. Overall, TIP has provided lower returns than IAU over the past ten years.
In this article, we’ll compare TIP vs. IAU. We’ll look at holdings and fund composition, as well as at their annual returns and performance. Moreover, I’ll also discuss TIP’s and IAU’s portfolio growth, industry exposure, and risk metrics and examine how these affect their overall returns.
|Name||iShares TIPS Bond ETF||iShares Gold Trust|
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 iShares Gold Trust (IAU) is a N/A fund that is issued by iShares. It currently has 28.61B total assets under management and has yielded an average annual return of 6.03% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.25%.
TIP’s dividend yield is 1.87% higher than that of IAU (1.87% vs. 0.0%). Also, TIP yielded on average 1.96% less per year over the past decade (4.07% vs. 6.03%). The expense ratio of TIP is 0.06 percentage points lower than IAU’s (0.19% vs. 0.25%).
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|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.
IAU’s Top Holdings are Gold, N/A, N/A, N/A, and N/A at 100.0%, 0%, 0%, 0%, and 0%.
N/A (0%), N/A (0%), and N/A (0%) have a slightly smaller but still significant weight. N/A and N/A are also represented in the IAU’s holdings at 0% and 0%.
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The iShares TIPS Bond ETF (TIP) has a Treynor Ratio of 2.24 with a R-squared of 66.57 and a Sharpe Ratio of 0.62. Its Alpha is -0.58 while TIP’s Mean Return is 0.28. Furthermore, the fund has a Standard Deviation of 4.33 and a Beta of 1.18.
The iShares Gold Trust (IAU) has a Alpha of 4.16 with a Treynor Ratio of 1.5 and a Sharpe Ratio of 0.13. Its Mean Return is 0.23 while IAU’s Beta is 0.48. Furthermore, the fund has a R-squared of 16.03 and a Standard Deviation of 16.97.
TIP’s Mean Return is 0.05 points higher than that of IAU and its R-squared is 50.54 points higher. With a Standard Deviation of 4.33, TIP is slightly less volatile than IAU. The Alpha and Beta of TIP are 4.74 points lower and 0.70 points higher than IAU’s Alpha and Beta.
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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 2010 was the strongest year for IAU, returning 27.93% on an annual basis. The poorest year for IAU in the last ten years was 2013, with a yield of -27.96%. Most years the iShares Gold Trust has given investors modest returns, such as in 2012, 2011, and 2016, when gains were 8.37%, 8.66%, and 8.85% 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 IAU, the end total would have been $16,786. This equates to a $6,786 profit over 11 years and a compound annual growth rate (CAGR) of 6.03%.
TIP’s CAGR is 1.96 percentage points lower than that of IAU and as a result, would have yielded $1,557 less on a $10,000 investment. Thus, TIP performed worse than IAU by 1.96% annually.
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