The iShares TIPS Bond ETF (TIP) and the iShares Russell Mid-Cap Value ETF (IWS) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and IWS is a iShares Mid-Cap Value fund. So, what’s the difference between TIP and IWS? And which fund is better?
The expense ratio of TIP is 0.04 percentage points lower than IWS’s (0.19% vs. 0.23%). TIP is mostly comprised of AAA bonds while IWS has a high exposure to the financial services sector. Overall, TIP has provided lower returns than IWS over the past ten years.
In this article, we’ll compare TIP vs. IWS. We’ll look at risk metrics and performance, as well as at their fund composition and annual returns. Moreover, I’ll also discuss TIP’s and IWS’s portfolio growth, holdings, and industry exposure and examine how these affect their overall returns.
|Name||iShares TIPS Bond ETF||iShares Russell Mid-Cap Value ETF|
|Category||Inflation-Protected Bond||Mid-Cap Value|
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 Value ETF (IWS) is a Mid-Cap Value fund that is issued by iShares. It currently has 14.24B total assets under management and has yielded an average annual return of 12.35% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.23%.
TIP’s dividend yield is 0.53% higher than that of IWS (1.87% vs. 1.34%). Also, TIP yielded on average 8.28% less per year over the past decade (4.07% vs. 12.35%). The expense ratio of TIP is 0.04 percentage points lower than IWS’s (0.19% vs. 0.23%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
|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.
|Marvell Technology Inc||0.69%|
|IHS Markit Ltd||0.62%|
|Prudential Financial Inc||0.56%|
|Otis Worldwide Corp Ordinary Shares||0.54%|
|International Flavors & Fragrances Inc||0.53%|
|Xcel Energy Inc||0.52%|
|Motorola Solutions Inc||0.52%|
IWS’s Top Holdings are Twitter Inc, Marvell Technology Inc, IHS Markit Ltd, Prudential Financial Inc, and Otis Worldwide Corp Ordinary Shares at 0.69%, 0.69%, 0.62%, 0.56%, and 0.54%.
International Flavors & Fragrances Inc (0.53%), Xcel Energy Inc (0.52%), and Motorola Solutions Inc (0.52%) have a slightly smaller but still significant weight. Aptiv PLC and Aflac Inc are also represented in the IWS’s holdings at 0.52% and 0.52%.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The iShares TIPS Bond ETF (TIP) has a Treynor Ratio of 2.24 with a Mean Return of 0.28 and a Sharpe Ratio of 0.62. Its Beta is 1.18 while TIP’s Standard Deviation is 4.33. Furthermore, the fund has a R-squared of 66.57 and a Alpha of -0.58.
The iShares Russell Mid-Cap Value ETF (IWS) has a Sharpe Ratio of 0.75 with a Mean Return of 1.06 and a Alpha of -4.11. Its R-squared is 87.04 while IWS’s Treynor Ratio is 10.3. Furthermore, the fund has a Standard Deviation of 16.03 and a Beta of 1.1.
TIP’s Mean Return is 0.78 points lower than that of IWS and its R-squared is 20.47 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than IWS. The Alpha and Beta of TIP are 3.53 points higher and 0.08 points higher than IWS’s Alpha and Beta.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
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 IWS, returning 33.11% on an annual basis. The poorest year for IWS in the last ten years was 2018, with a yield of -12.36%. Most years the iShares Russell Mid-Cap Value ETF has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 13.1%, 14.49%, and 18.27% 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 IWS, the end total would have been $33,083. This equates to a $23,083 profit over 11 years and a compound annual growth rate (CAGR) of 12.35%.
TIP’s CAGR is 8.28 percentage points lower than that of IWS and as a result, would have yielded $17,854 less on a $10,000 investment. Thus, TIP performed worse than IWS by 8.28% annually.
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)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) 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!
3) 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!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.