TIP vs. MDY: What’s The Difference?

The iShares TIPS Bond ETF (TIP) and the SPDR S&P MIDCAP 400 ETF Trust (MDY) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and MDY is a SPDR State Street Global Advisors Mid-Cap Blend fund. So, what’s the difference between TIP and MDY? And which fund is better?

The expense ratio of TIP is 0.04 percentage points lower than MDY’s (0.19% vs. 0.23%). TIP is mostly comprised of AAA bonds while MDY has a high exposure to the industrials sector. Overall, TIP has provided lower returns than MDY over the past ten years.

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

Summary

TIP MDY
Name iShares TIPS Bond ETF SPDR S&P MIDCAP 400 ETF Trust
Category Inflation-Protected Bond Mid-Cap Blend
Issuer iShares SPDR State Street Global Advisors
AUM 28.3B 21.31B
Avg. Return 4.07% 13.29%
Div. Yield 1.87% 0.94%
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 SPDR S&P MIDCAP 400 ETF Trust (MDY) is a Mid-Cap Blend fund that is issued by SPDR State Street Global Advisors. It currently has 21.31B total assets under management and has yielded an average annual return of 13.29% over the past 10 years. The fund has a dividend yield of 0.94% with an expense ratio of 0.23%.

TIP’s dividend yield is 0.93% higher than that of MDY (1.87% vs. 0.94%). Also, TIP yielded on average 9.22% less per year over the past decade (4.07% vs. 13.29%). The expense ratio of TIP is 0.04 percentage points lower than MDY’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.

MDY - Holdings

MDY Holdings Weight
Bio-Techne Corp 0.75%
Molina Healthcare Inc 0.63%
Cognex Corp 0.63%
Fair Isaac Corp 0.62%
XPO Logistics Inc 0.61%
SolarEdge Technologies Inc 0.61%
Signature Bank 0.6%
Graco Inc 0.55%
Camden Property Trust 0.55%
FactSet Research Systems Inc 0.54%

MDY’s Top Holdings are Bio-Techne Corp, Molina Healthcare Inc, Cognex Corp, Fair Isaac Corp, and XPO Logistics Inc at 0.75%, 0.63%, 0.63%, 0.62%, and 0.61%.

SolarEdge Technologies Inc (0.61%), Signature Bank (0.6%), and Graco Inc (0.55%) have a slightly smaller but still significant weight. Camden Property Trust and FactSet Research Systems Inc are also represented in the MDY’s holdings at 0.55% and 0.54%.

Risk Analysis

TIP MDY
Mean Return 0.28 1.08
R-squared 66.57 86.66
Std. Deviation 4.33 16.83
Alpha -0.58 -4.1
Beta 1.18 1.15
Sharpe Ratio 0.62 0.73
Treynor Ratio 2.24 9.97

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

The SPDR S&P MIDCAP 400 ETF Trust (MDY) has a R-squared of 86.66 with a Alpha of -4.1 and a Mean Return of 1.08. Its Sharpe Ratio is 0.73 while MDY’s Treynor Ratio is 9.97. Furthermore, the fund has a Beta of 1.15 and a Standard Deviation of 16.83.

TIP’s Mean Return is 0.80 points lower than that of MDY and its R-squared is 20.09 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than MDY. The Alpha and Beta of TIP are 3.52 points higher and 0.03 points higher than MDY’s Alpha and Beta.

Performance

Annual Returns

TIP vs. MDY - Annual Returns

Year TIP MDY
2020 10.91% 13.51%
2019 8.28% 25.86%
2018 -1.43% -11.28%
2017 2.92% 15.89%
2016 4.56% 20.33%
2015 -1.59% -2.4%
2014 3.49% 9.42%
2013 -8.65% 33.08%
2012 6.8% 17.58%
2011 13.4% -1.99%
2010 6.1% 26.17%

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 MDY, returning 33.08% on an annual basis. The poorest year for MDY in the last ten years was 2018, with a yield of -11.28%. Most years the SPDR S&P MIDCAP 400 ETF Trust has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 13.51%, 15.89%, and 17.58% respectively.

Portfolio Growth

TIP vs. MDY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $15,229 4.07%
MDY $10,000 $36,524 13.29%

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 MDY, the end total would have been $36,524. This equates to a $26,524 profit over 11 years and a compound annual growth rate (CAGR) of 13.29%.

TIP’s CAGR is 9.22 percentage points lower than that of MDY and as a result, would have yielded $21,295 less on a $10,000 investment. Thus, TIP performed worse than MDY by 9.22% annually.


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