TIP vs. MUB: What’s The Difference?

The iShares TIPS Bond ETF (TIP) and the iShares National Muni Bond ETF (MUB) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and MUB is a iShares Muni National Interm fund. So, what’s the difference between TIP and MUB? And which fund is better?

The expense ratio of TIP is 0.12 percentage points higher than MUB’s (0.19% vs. 0.07%). TIP is mostly comprised of AAA bonds and MUB has a high exposure to AA bond. Overall, TIP has provided higher returns than MUB over the past ten years.

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

Summary

TIP MUB
Name iShares TIPS Bond ETF iShares National Muni Bond ETF
Category Inflation-Protected Bond Muni National Interm
Issuer iShares iShares
AUM 28.3B 22.71B
Avg. Return 4.07% 4.04%
Div. Yield 1.87% 1.96%
Expense Ratio 0.19% 0.07%

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 National Muni Bond ETF (MUB) is a Muni National Interm fund that is issued by iShares. It currently has 22.71B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.96% with an expense ratio of 0.07%.

TIP’s dividend yield is 0.09% lower than that of MUB (1.87% vs. 1.96%). Also, TIP yielded on average 0.03% more per year over the past decade (4.07% vs. 4.04%). The expense ratio of TIP is 0.12 percentage points higher than MUB’s (0.19% vs. 0.07%).

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.

MUB - Holdings

MUB Bond Sectors Weight
AA 60.38%
AAA 18.39%
A 15.04%
BBB 6.0%
Others 0.17%
BB 0.02%
Below B 0.0%
B 0.0%
US Government 0.0%

MUB’s Top Bond Sectors are ratings of AA, AAA, A, BBB, and Others at 60.38%, 18.39%, 15.04%, 6.0%, and 0.17%. The fund is less weighted towards BB (0.02%), Below B (0.0%), and B (0.0%) rated bonds.

Risk Analysis

TIP MUB
Mean Return 0.28 0.32
R-squared 66.57 99
Std. Deviation 4.33 3.68
Alpha -0.58 -0.46
Beta 1.18 1.01
Sharpe Ratio 0.62 0.88
Treynor Ratio 2.24 3.2

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

The iShares National Muni Bond ETF (MUB) has a Beta of 1.01 with a Treynor Ratio of 3.2 and a R-squared of 99. Its Standard Deviation is 3.68 while MUB’s Alpha is -0.46. Furthermore, the fund has a Mean Return of 0.32 and a Sharpe Ratio of 0.88.

TIP’s Mean Return is 0.04 points lower than that of MUB and its R-squared is 32.43 points lower. With a Standard Deviation of 4.33, TIP is slightly more volatile than MUB. The Alpha and Beta of TIP are 0.12 points lower and 0.17 points higher than MUB’s Alpha and Beta.

Performance

Annual Returns

TIP vs. MUB - Annual Returns

Year TIP MUB
2020 10.91% 4.87%
2019 8.28% 7.28%
2018 -1.43% 0.86%
2017 2.92% 4.61%
2016 4.56% 0.06%
2015 -1.59% 2.99%
2014 3.49% 8.61%
2013 -8.65% -3.26%
2012 6.8% 6.14%
2011 13.4% 10.85%
2010 6.1% 1.4%

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 2011 was the strongest year for MUB, returning 10.85% on an annual basis. The poorest year for MUB in the last ten years was 2013, with a yield of -3.26%. Most years the iShares National Muni Bond ETF has given investors modest returns, such as in 2015, 2017, and 2020, when gains were 2.99%, 4.61%, and 4.87% respectively.

Portfolio Growth

TIP vs. MUB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $15,229 4.07%
MUB $10,000 $15,333 4.04%

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 MUB, the end total would have been $15,333. This equates to a $5,333 profit over 11 years and a compound annual growth rate (CAGR) of 4.04%.

TIP’s CAGR is 0.03 percentage points higher than that of MUB and as a result, would have yielded $104 less on a $10,000 investment. Thus, TIP outperformed MUB by 0.03% annually.


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