TIP vs. IWN: What’s The Difference?

The iShares TIPS Bond ETF (TIP) and the iShares Russell 2000 Value ETF (IWN) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and IWN is a iShares Small Value fund. So, what’s the difference between TIP and IWN? And which fund is better?

The expense ratio of TIP is 0.05 percentage points lower than IWN’s (0.19% vs. 0.24%). TIP is mostly comprised of AAA bonds while IWN has a high exposure to the financial services sector. Overall, TIP has provided lower returns than IWN over the past ten years.

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

Summary

TIP IWN
Name iShares TIPS Bond ETF iShares Russell 2000 Value ETF
Category Inflation-Protected Bond Small Value
Issuer iShares iShares
AUM 28.3B 15.48B
Avg. Return 4.07% 10.96%
Div. Yield 1.87% 1.26%
Expense Ratio 0.19% 0.24%

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 2000 Value ETF (IWN) is a Small Value fund that is issued by iShares. It currently has 15.48B total assets under management and has yielded an average annual return of 10.96% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.24%.

TIP’s dividend yield is 0.61% higher than that of IWN (1.87% vs. 1.26%). Also, TIP yielded on average 6.89% less per year over the past decade (4.07% vs. 10.96%). The expense ratio of TIP is 0.05 percentage points lower than IWN’s (0.19% vs. 0.24%).

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.

IWN - Holdings

IWN Holdings Weight
AMC Entertainment Holdings Inc Class A 1.06%
Tenet Healthcare Corp 0.47%
Stag Industrial Inc 0.47%
Ovintiv Inc 0.45%
EMCOR Group Inc 0.42%
Valley National Bancorp 0.37%
Chesapeake Energy Corp Ordinary Shares – New 0.37%
Agree Realty Corp 0.36%
Macy’s Inc 0.35%
Essent Group Ltd 0.35%

IWN’s Top Holdings are AMC Entertainment Holdings Inc Class A, Tenet Healthcare Corp, Stag Industrial Inc, Ovintiv Inc, and EMCOR Group Inc at 1.06%, 0.47%, 0.47%, 0.45%, and 0.42%.

Valley National Bancorp (0.37%), Chesapeake Energy Corp Ordinary Shares – New (0.37%), and Agree Realty Corp (0.36%) have a slightly smaller but still significant weight. Macy’s Inc and Essent Group Ltd are also represented in the IWN’s holdings at 0.35% and 0.35%.

Risk Analysis

TIP IWN
Mean Return 0.28 1.01
R-squared 66.57 72.64
Std. Deviation 4.33 19.28
Alpha -0.58 -6.32
Beta 1.18 1.21
Sharpe Ratio 0.62 0.59
Treynor Ratio 2.24 8.3

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

The iShares Russell 2000 Value ETF (IWN) has a Alpha of -6.32 with a Standard Deviation of 19.28 and a Mean Return of 1.01. Its Sharpe Ratio is 0.59 while IWN’s Beta is 1.21. Furthermore, the fund has a Treynor Ratio of 8.3 and a R-squared of 72.64.

TIP’s Mean Return is 0.73 points lower than that of IWN and its R-squared is 6.07 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than IWN. The Alpha and Beta of TIP are 5.74 points higher and 0.03 points lower than IWN’s Alpha and Beta.

Performance

Annual Returns

TIP vs. IWN - Annual Returns

Year TIP IWN
2020 10.91% 4.5%
2019 8.28% 22.17%
2018 -1.43% -12.94%
2017 2.92% 7.73%
2016 4.56% 31.64%
2015 -1.59% -7.53%
2014 3.49% 4.13%
2013 -8.65% 34.3%
2012 6.8% 17.92%
2011 13.4% -5.64%
2010 6.1% 24.29%

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 IWN, returning 34.3% on an annual basis. The poorest year for IWN in the last ten years was 2018, with a yield of -12.94%. Most years the iShares Russell 2000 Value ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 4.5%, 7.73%, and 17.92% respectively.

Portfolio Growth

TIP vs. IWN - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $15,229 4.07%
IWN $10,000 $28,189 10.96%

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 IWN, the end total would have been $28,189. This equates to a $18,189 profit over 11 years and a compound annual growth rate (CAGR) of 10.96%.

TIP’s CAGR is 6.89 percentage points lower than that of IWN and as a result, would have yielded $12,960 less on a $10,000 investment. Thus, TIP performed worse than IWN by 6.89% annually.


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