TIP vs. IWS: What’s The Difference?

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.

Summary

TIP IWS
Name iShares TIPS Bond ETF iShares Russell Mid-Cap Value ETF
Category Inflation-Protected Bond Mid-Cap Value
Issuer iShares iShares
AUM 28.3B 14.24B
Avg. Return 4.07% 12.35%
Div. Yield 1.87% 1.34%
Expense Ratio 0.19% 0.23%

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%).

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.

IWS - Holdings

IWS Holdings Weight
Twitter Inc 0.69%
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%
Aptiv PLC 0.52%
Aflac 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%.

Risk Analysis

TIP IWS
Mean Return 0.28 1.06
R-squared 66.57 87.04
Std. Deviation 4.33 16.03
Alpha -0.58 -4.11
Beta 1.18 1.1
Sharpe Ratio 0.62 0.75
Treynor Ratio 2.24 10.3

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.

Performance

Annual Returns

TIP vs. IWS - Annual Returns

Year TIP IWS
2020 10.91% 4.76%
2019 8.28% 26.78%
2018 -1.43% -12.36%
2017 2.92% 13.1%
2016 4.56% 19.69%
2015 -1.59% -4.93%
2014 3.49% 14.49%
2013 -8.65% 33.11%
2012 6.8% 18.27%
2011 13.4% -1.55%
2010 6.1% 24.46%

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.

Portfolio Growth

TIP vs. IWS - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $15,229 4.07%
IWS $10,000 $33,083 12.35%

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.


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