TIP vs. IWR: What’s The Difference?

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

TIP and IWR have the same expense ratio: 0.19%. TIP is mostly comprised of AAA bonds while IWR has a high exposure to the technology sector. Overall, TIP has provided lower returns than IWR over the past ten years.

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

Summary

TIP IWR
Name iShares TIPS Bond ETF iShares Russell Mid-Cap ETF
Category Inflation-Protected Bond Mid-Cap Blend
Issuer iShares iShares
AUM 28.3B 29.84B
Avg. Return 4.07% 14.15%
Div. Yield 1.87% 0.99%
Expense Ratio 0.19% 0.19%

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 Mid-Cap ETF (IWR) is a Mid-Cap Blend fund that is issued by iShares. It currently has 29.84B total assets under management and has yielded an average annual return of 14.15% over the past 10 years. The fund has a dividend yield of 0.99% with an expense ratio of 0.19%.

TIP’s dividend yield is 0.88% higher than that of IWR (1.87% vs. 0.99%). Also, TIP yielded on average 10.08% less per year over the past decade (4.07% vs. 14.15%). TIP and IWR have the same expense ratio: 0.19%.

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.

IWR - Holdings

IWR Holdings Weight
IDEXX Laboratories Inc 0.51%
DocuSign Inc 0.51%
Twitter Inc 0.48%
Chipotle Mexican Grill Inc 0.47%
Roku Inc Class A 0.44%
Marvell Technology Inc 0.44%
DexCom Inc 0.44%
Trane Technologies PLC 0.43%
MSCI Inc 0.43%
Carrier Global Corp Ordinary Shares 0.43%

IWR’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Twitter Inc, Chipotle Mexican Grill Inc, and Roku Inc Class A at 0.51%, 0.51%, 0.48%, 0.47%, and 0.44%.

Marvell Technology Inc (0.44%), DexCom Inc (0.44%), and Trane Technologies PLC (0.43%) have a slightly smaller but still significant weight. MSCI Inc and Carrier Global Corp Ordinary Shares are also represented in the IWR’s holdings at 0.43% and 0.43%.

Risk Analysis

TIP IWR
Mean Return 0.28 1.17
R-squared 66.57 91.52
Std. Deviation 4.33 15.66
Alpha -0.58 -2.8
Beta 1.18 1.11
Sharpe Ratio 0.62 0.86
Treynor Ratio 2.24 11.72

The iShares TIPS Bond ETF (TIP) has a R-squared of 66.57 with a Treynor Ratio of 2.24 and a Mean Return of 0.28. 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 Alpha of -0.58.

The iShares Russell Mid-Cap ETF (IWR) has a Treynor Ratio of 11.72 with a Beta of 1.11 and a Mean Return of 1.17. Its Standard Deviation is 15.66 while IWR’s Sharpe Ratio is 0.86. Furthermore, the fund has a Alpha of -2.8 and a R-squared of 91.52.

TIP’s Mean Return is 0.89 points lower than that of IWR and its R-squared is 24.95 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than IWR. The Alpha and Beta of TIP are 2.22 points higher and 0.07 points higher than IWR’s Alpha and Beta.

Performance

Annual Returns

TIP vs. IWR - Annual Returns

Year TIP IWR
2020 10.91% 16.91%
2019 8.28% 30.31%
2018 -1.43% -9.13%
2017 2.92% 18.32%
2016 4.56% 13.58%
2015 -1.59% -2.57%
2014 3.49% 13.03%
2013 -8.65% 34.5%
2012 6.8% 17.13%
2011 13.4% -1.67%
2010 6.1% 25.25%

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 IWR, returning 34.5% on an annual basis. The poorest year for IWR in the last ten years was 2018, with a yield of -9.13%. Most years the iShares Russell Mid-Cap ETF has given investors modest returns, such as in 2016, 2020, and 2012, when gains were 13.58%, 16.91%, and 17.13% respectively.

Portfolio Growth

TIP vs. IWR - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $15,229 4.07%
IWR $10,000 $39,751 14.15%

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 IWR, the end total would have been $39,751. This equates to a $29,751 profit over 11 years and a compound annual growth rate (CAGR) of 14.15%.

TIP’s CAGR is 10.08 percentage points lower than that of IWR and as a result, would have yielded $24,522 less on a $10,000 investment. Thus, TIP performed worse than IWR by 10.08% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply