TIP vs. MTUM: What’s The Difference?

The iShares TIPS Bond ETF (TIP) and the iShares MSCI USA Momentum Factor ETF (MTUM) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and MTUM is a iShares Large Growth fund. So, what’s the difference between TIP and MTUM? And which fund is better?

The expense ratio of TIP is 0.04 percentage points higher than MTUM’s (0.19% vs. 0.15%). TIP is mostly comprised of AAA bonds while MTUM has a high exposure to the financial services sector. Overall, TIP has provided lower returns than MTUM over the past ten years.

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

Summary

TIP MTUM
Name iShares TIPS Bond ETF iShares MSCI USA Momentum Factor ETF
Category Inflation-Protected Bond Large Growth
Issuer iShares iShares
AUM 28.3B 14.53B
Avg. Return 4.07% 17.37%
Div. Yield 1.87% 0.44%
Expense Ratio 0.19% 0.15%

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 MSCI USA Momentum Factor ETF (MTUM) is a Large Growth fund that is issued by iShares. It currently has 14.53B total assets under management and has yielded an average annual return of 17.37% over the past 10 years. The fund has a dividend yield of 0.44% with an expense ratio of 0.15%.

TIP’s dividend yield is 1.43% higher than that of MTUM (1.87% vs. 0.44%). Also, TIP yielded on average 13.30% less per year over the past decade (4.07% vs. 17.37%). The expense ratio of TIP is 0.04 percentage points higher than MTUM’s (0.19% vs. 0.15%).

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.

MTUM - Holdings

MTUM Holdings Weight
Tesla Inc 5.63%
The Walt Disney Co 4.39%
JPMorgan Chase & Co 4.35%
Berkshire Hathaway Inc Class B 4.34%
Bank of America Corp 3.81%
PayPal Holdings Inc 3.76%
Wells Fargo & Co 3.05%
Applied Materials Inc 3.05%
Moderna Inc 2.89%
Alphabet Inc Class C 2.84%

MTUM’s Top Holdings are Tesla Inc, The Walt Disney Co, JPMorgan Chase & Co, Berkshire Hathaway Inc Class B, and Bank of America Corp at 5.63%, 4.39%, 4.35%, 4.34%, and 3.81%.

PayPal Holdings Inc (3.76%), Wells Fargo & Co (3.05%), and Applied Materials Inc (3.05%) have a slightly smaller but still significant weight. Moderna Inc and Alphabet Inc Class C are also represented in the MTUM’s holdings at 2.89% and 2.84%.

Risk Analysis

TIP MTUM
Mean Return 0.28 0
R-squared 66.57 0
Std. Deviation 4.33 0
Alpha -0.58 0
Beta 1.18 0
Sharpe Ratio 0.62 0
Treynor Ratio 2.24 0

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

The iShares MSCI USA Momentum Factor ETF (MTUM) has a Sharpe Ratio of 0 with a Alpha of 0 and a R-squared of 0. Its Standard Deviation is 0 while MTUM’s Mean Return is 0. Furthermore, the fund has a Beta of 0 and a Treynor Ratio of 0.

TIP’s Mean Return is 0.28 points higher than that of MTUM and its R-squared is 66.57 points higher. With a Standard Deviation of 4.33, TIP is slightly more volatile than MTUM. The Alpha and Beta of TIP are 0.58 points lower and 1.18 points higher than MTUM’s Alpha and Beta.

Performance

Annual Returns

TIP vs. MTUM - Annual Returns

Year TIP MTUM
2020 10.91% 29.69%
2019 8.28% 27.57%
2018 -1.43% -1.77%
2017 2.92% 37.6%
2016 4.56% 4.89%
2015 -1.59% 9.12%
2014 3.49% 14.48%
2013 -8.65% 0.0%
2012 6.8% 0.0%
2011 13.4% 0.0%
2010 6.1% 0.0%

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 2017 was the strongest year for MTUM, returning 37.6% on an annual basis. The poorest year for MTUM in the last ten years was 2018, with a yield of -1.77%. Most years the iShares MSCI USA Momentum Factor ETF has given investors modest returns, such as in 2010, 2016, and 2015, when gains were 0.0%, 4.89%, and 9.12% respectively.

Portfolio Growth

TIP vs. MTUM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $12,973 4.07%
MTUM $10,000 $29,301 17.37%

A $10,000 investment in TIP would have resulted in a final balance of $12,973. This is a profit of $2,973 over 7 years and amounts to a compound annual growth rate (CAGR) of 4.07%.

With a $10,000 investment in MTUM, the end total would have been $29,301. This equates to a $19,301 profit over 7 years and a compound annual growth rate (CAGR) of 17.37%.

TIP’s CAGR is 13.30 percentage points lower than that of MTUM and as a result, would have yielded $16,328 less on a $10,000 investment. Thus, TIP performed worse than MTUM by 13.30% annually.


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