The iShares TIPS Bond ETF (TIP) and the Invesco S&P 500 Equal Weight ETF (RSP) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and RSP is a Invesco Large Blend fund. So, what’s the difference between TIP and RSP? And which fund is better?
The expense ratio of TIP is 0.01 percentage points lower than RSP’s (0.19% vs. 0.2%). TIP is mostly comprised of AAA bonds while RSP has a high exposure to the technology sector. Overall, TIP has provided lower returns than RSP over the past ten years.
In this article, we’ll compare TIP vs. RSP. We’ll look at annual returns and performance, as well as at their holdings and fund composition. Moreover, I’ll also discuss TIP’s and RSP’s risk metrics, industry exposure, and portfolio growth and examine how these affect their overall returns.
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|Name||iShares TIPS Bond ETF||Invesco S&P 500 Equal Weight ETF|
|Category||Inflation-Protected Bond||Large Blend|
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 Invesco S&P 500 Equal Weight ETF (RSP) is a Large Blend fund that is issued by Invesco. It currently has 28.62B total assets under management and has yielded an average annual return of 13.79% over the past 10 years. The fund has a dividend yield of 1.31% with an expense ratio of 0.2%.
TIP’s dividend yield is 0.56% higher than that of RSP (1.87% vs. 1.31%). Also, TIP yielded on average 9.72% less per year over the past decade (4.07% vs. 13.79%). The expense ratio of TIP is 0.01 percentage points lower than RSP’s (0.19% vs. 0.2%).
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|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.
|Chipotle Mexican Grill Inc||0.27%|
|Nike Inc Class B||0.25%|
|Monolithic Power Systems Inc||0.25%|
|Enphase Energy Inc||0.25%|
|Advanced Micro Devices Inc||0.25%|
|IDEXX Laboratories Inc||0.24%|
RSP’s Top Holdings are Chipotle Mexican Grill Inc, Nike Inc Class B, MSCI Inc, Monolithic Power Systems Inc, and Enphase Energy Inc at 0.27%, 0.25%, 0.25%, 0.25%, and 0.25%.
Advanced Micro Devices Inc (0.25%), ResMed Inc (0.24%), and PerkinElmer Inc (0.24%) have a slightly smaller but still significant weight. IDEXX Laboratories Inc and Danaher Corp are also represented in the RSP’s holdings at 0.24% and 0.24%.
The iShares TIPS Bond ETF (TIP) has a Mean Return of 0.28 with a Treynor Ratio of 2.24 and a Beta of 1.18. Its Alpha is -0.58 while TIP’s Sharpe Ratio is 0.62. Furthermore, the fund has a Standard Deviation of 4.33 and a R-squared of 66.57.
The Invesco S&P 500 Equal Weight ETF (RSP) has a R-squared of 94.47 with a Treynor Ratio of 12.12 and a Beta of 1.1. Its Alpha is -2.45 while RSP’s Sharpe Ratio is 0.89. Furthermore, the fund has a Standard Deviation of 15.36 and a Mean Return of 1.19.
TIP’s Mean Return is 0.91 points lower than that of RSP and its R-squared is 27.90 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than RSP. The Alpha and Beta of TIP are 1.87 points higher and 0.08 points higher than RSP’s Alpha and Beta.
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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 RSP, returning 35.6% on an annual basis. The poorest year for RSP in the last ten years was 2018, with a yield of -7.77%. Most years the Invesco S&P 500 Equal Weight ETF has given investors modest returns, such as in 2014, 2016, and 2012, when gains were 14.02%, 14.34%, and 17.04% 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 RSP, the end total would have been $38,664. This equates to a $28,664 profit over 11 years and a compound annual growth rate (CAGR) of 13.79%.
TIP’s CAGR is 9.72 percentage points lower than that of RSP and as a result, would have yielded $23,435 less on a $10,000 investment. Thus, TIP performed worse than RSP by 9.72% annually.
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