TIP vs. TQQQ: What’s The Difference?

The iShares TIPS Bond ETF (TIP) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between TIP and TQQQ? And which fund is better?

The expense ratio of TIP is 0.76 percentage points lower than TQQQ’s (0.19% vs. 0.95%). TIP is mostly comprised of AAA bonds while TQQQ has a high exposure to the technology sector. Overall, TIP has provided lower returns than TQQQ over the past ten years.

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

Summary

TIP TQQQ
Name iShares TIPS Bond ETF ProShares UltraPro QQQ
Category Inflation-Protected Bond Trading–Leveraged Equity
Issuer iShares ProShares
AUM 28.3B 12.41B
Avg. Return 4.07% 61.22%
Div. Yield 1.87% 0.0%
Expense Ratio 0.19% 0.95%

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 ProShares UltraPro QQQ (TQQQ) is a Trading–Leveraged Equity fund that is issued by ProShares. It currently has 12.41B total assets under management and has yielded an average annual return of 61.22% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.95%.

TIP’s dividend yield is 1.87% higher than that of TQQQ (1.87% vs. 0.0%). Also, TIP yielded on average 57.15% less per year over the past decade (4.07% vs. 61.22%). The expense ratio of TIP is 0.76 percentage points lower than TQQQ’s (0.19% vs. 0.95%).

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.

TQQQ - Holdings

TQQQ Holdings Weight
Nasdaq 100 Index Swap Goldman Sachs International 45.11%
Nasdaq 100 Index Swap Societe Generale 44.73%
Nasdaq 100 Index Swap Bnp Paribas 38.05%
Nasdaq 100 Index Swap Bank Of America Na 31.53%
Nasdaq 100 Index Swap Citibank Na 31.49%
Nasdaq 100 Index Swap Jp Morgan Securities 26.2%
Apple Inc 7.49%
Microsoft Corp 6.69%
Nasdaq 100 Index Swap Credit Suisse International 5.9%
Amazon.com Inc 5.68%

TQQQ’s Top Holdings are Nasdaq 100 Index Swap Goldman Sachs International, Nasdaq 100 Index Swap Societe Generale, Nasdaq 100 Index Swap Bnp Paribas, Nasdaq 100 Index Swap Bank Of America Na, and Nasdaq 100 Index Swap Citibank Na at 45.11%, 44.73%, 38.05%, 31.53%, and 31.49%.

Nasdaq 100 Index Swap Jp Morgan Securities (26.2%), Apple Inc (7.49%), and Microsoft Corp (6.69%) have a slightly smaller but still significant weight. Nasdaq 100 Index Swap Credit Suisse International and Amazon.com Inc are also represented in the TQQQ’s holdings at 5.9% and 5.68%.

Risk Analysis

TIP TQQQ
Mean Return 0.28 4.65
R-squared 66.57 83.64
Std. Deviation 4.33 50.08
Alpha -0.58 7.29
Beta 1.18 3.37
Sharpe Ratio 0.62 1.1
Treynor Ratio 2.24 15.65

The iShares TIPS Bond ETF (TIP) has a Standard Deviation of 4.33 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 Mean Return of 0.28 and a R-squared of 66.57.

The ProShares UltraPro QQQ (TQQQ) has a Sharpe Ratio of 1.1 with a R-squared of 83.64 and a Treynor Ratio of 15.65. Its Alpha is 7.29 while TQQQ’s Mean Return is 4.65. Furthermore, the fund has a Standard Deviation of 50.08 and a Beta of 3.37.

TIP’s Mean Return is 4.37 points lower than that of TQQQ and its R-squared is 17.07 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than TQQQ. The Alpha and Beta of TIP are 7.87 points lower and 2.19 points lower than TQQQ’s Alpha and Beta.

Performance

Annual Returns

TIP vs. TQQQ - Annual Returns

Year TIP TQQQ
2020 10.91% 109.85%
2019 8.28% 133.93%
2018 -1.43% -19.65%
2017 2.92% 118.65%
2016 4.56% 11.04%
2015 -1.59% 17.41%
2014 3.49% 56.82%
2013 -8.65% 139.98%
2012 6.8% 51.95%
2011 13.4% -7.77%
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 2013 was the strongest year for TQQQ, returning 139.98% on an annual basis. The poorest year for TQQQ in the last ten years was 2018, with a yield of -19.65%. Most years the ProShares UltraPro QQQ has given investors modest returns, such as in 2015, 2012, and 2014, when gains were 17.41%, 51.95%, and 56.82% respectively.

Portfolio Growth

TIP vs. TQQQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $14,353 4.07%
TQQQ $10,000 $593,012 61.22%

A $10,000 investment in TIP would have resulted in a final balance of $14,353. This is a profit of $4,353 over 10 years and amounts to a compound annual growth rate (CAGR) of 4.07%.

With a $10,000 investment in TQQQ, the end total would have been $593,012. This equates to a $583,012 profit over 10 years and a compound annual growth rate (CAGR) of 61.22%.

TIP’s CAGR is 57.15 percentage points lower than that of TQQQ and as a result, would have yielded $578,659 less on a $10,000 investment. Thus, TIP performed worse than TQQQ by 57.15% annually.


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