The iShares TIPS Bond ETF (TIP) and the iShares Russell 1000 ETF (IWB) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and IWB is a iShares Large Blend fund. So, what’s the difference between TIP and IWB? And which fund is better?
The expense ratio of TIP is 0.04 percentage points higher than IWB’s (0.19% vs. 0.15%). TIP is mostly comprised of AAA bonds while IWB has a high exposure to the technology sector. Overall, TIP has provided lower returns than IWB over the past ten years.
In this article, we’ll compare TIP vs. IWB. We’ll look at portfolio growth and fund composition, as well as at their holdings and annual returns. Moreover, I’ll also discuss TIP’s and IWB’s risk metrics, industry exposure, and performance and examine how these affect their overall returns.
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Summary
| TIP | IWB | |
| Name | iShares TIPS Bond ETF | iShares Russell 1000 ETF |
| Category | Inflation-Protected Bond | Large Blend |
| Issuer | iShares | iShares |
| AUM | 28.3B | 30.54B |
| Avg. Return | 4.07% | 14.64% |
| Div. Yield | 1.87% | 1.14% |
| Expense Ratio | 0.19% | 0.15% |
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 Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.
TIP’s dividend yield is 0.73% higher than that of IWB (1.87% vs. 1.14%). Also, TIP yielded on average 10.56% less per year over the past decade (4.07% vs. 14.64%). The expense ratio of TIP is 0.04 percentage points higher than IWB’s (0.19% vs. 0.15%).
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Fund Composition
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.
| IWB Holdings | Weight |
| Apple Inc | 5.45% |
| Microsoft Corp | 5.11% |
| Amazon.com Inc | 3.43% |
| Facebook Inc Class A | 2.03% |
| Alphabet Inc Class A | 1.93% |
| Alphabet Inc Class C | 1.82% |
| Tesla Inc | 1.27% |
| Berkshire Hathaway Inc Class B | 1.24% |
| NVIDIA Corp | 1.11% |
| JPMorgan Chase & Co | 1.09% |
IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.
Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.
Risk Analysis
| TIP | IWB | |
| Mean Return | 0.28 | 1.27 |
| R-squared | 66.57 | 99.73 |
| Std. Deviation | 4.33 | 13.87 |
| Alpha | -0.58 | -0.38 |
| Beta | 1.18 | 1.02 |
| Sharpe Ratio | 0.62 | 1.05 |
| Treynor Ratio | 2.24 | 14.31 |
The iShares TIPS Bond ETF (TIP) has a Beta of 1.18 with a R-squared of 66.57 and a Standard Deviation of 4.33. Its Sharpe Ratio is 0.62 while TIP’s Alpha is -0.58. Furthermore, the fund has a Treynor Ratio of 2.24 and a Mean Return of 0.28.
The iShares Russell 1000 ETF (IWB) has a R-squared of 99.73 with a Standard Deviation of 13.87 and a Alpha of -0.38. Its Mean Return is 1.27 while IWB’s Treynor Ratio is 14.31. Furthermore, the fund has a Sharpe Ratio of 1.05 and a Beta of 1.02.
TIP’s Mean Return is 0.99 points lower than that of IWB and its R-squared is 33.16 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than IWB. The Alpha and Beta of TIP are 0.20 points lower and 0.16 points higher than IWB’s Alpha and Beta.
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Performance
Annual Returns
| Year | TIP | IWB |
| 2020 | 10.91% | 20.8% |
| 2019 | 8.28% | 31.26% |
| 2018 | -1.43% | -4.91% |
| 2017 | 2.92% | 21.53% |
| 2016 | 4.56% | 11.91% |
| 2015 | -1.59% | 0.82% |
| 2014 | 3.49% | 13.08% |
| 2013 | -8.65% | 32.93% |
| 2012 | 6.8% | 16.27% |
| 2011 | 13.4% | 1.36% |
| 2010 | 6.1% | 15.94% |
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 IWB, returning 32.93% on an annual basis. The poorest year for IWB in the last ten years was 2018, with a yield of -4.91%. Most years the iShares Russell 1000 ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.08%, 15.94%, and 16.27% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| TIP | $10,000 | $15,229 | 4.07% |
| IWB | $10,000 | $42,462 | 14.64% |
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 IWB, the end total would have been $42,462. This equates to a $32,462 profit over 11 years and a compound annual growth rate (CAGR) of 14.64%.
TIP’s CAGR is 10.56 percentage points lower than that of IWB and as a result, would have yielded $27,233 less on a $10,000 investment. Thus, TIP performed worse than IWB by 10.56% annually.
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