TIP vs. USMV: What’s The Difference?

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

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

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

Summary

TIP USMV
Name iShares TIPS Bond ETF iShares MSCI USA Min Vol Factor ETF
Category Inflation-Protected Bond Large Blend
Issuer iShares iShares
AUM 28.3B 27.6B
Avg. Return 4.07% 13.89%
Div. Yield 1.87% 1.5%
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 Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

TIP’s dividend yield is 0.37% higher than that of USMV (1.87% vs. 1.5%). Also, TIP yielded on average 9.82% less per year over the past decade (4.07% vs. 13.89%). The expense ratio of TIP is 0.04 percentage points higher than USMV’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.

USMV - Holdings

USMV Holdings Weight
Eli Lilly and Co 1.64%
Microsoft Corp 1.62%
T-Mobile US Inc 1.51%
Accenture PLC Class A 1.51%
Visa Inc Class A 1.49%
Waste Management Inc 1.45%
Adobe Inc 1.45%
The Kroger Co 1.44%
Johnson & Johnson 1.42%
Gilead Sciences Inc 1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

Risk Analysis

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

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

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

Performance

Annual Returns

TIP vs. USMV - Annual Returns

Year TIP USMV
2020 10.91% 5.6%
2019 8.28% 27.77%
2018 -1.43% 1.36%
2017 2.92% 18.97%
2016 4.56% 10.5%
2015 -1.59% 5.5%
2014 3.49% 16.34%
2013 -8.65% 25.11%
2012 6.8% 11.04%
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 2019 was the strongest year for USMV, returning 27.77% on an annual basis. The poorest year for USMV in the last ten years was 2011, with a yield of 0.0%. Most years the iShares MSCI USA Min Vol Factor ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 5.6%, 10.5%, and 11.04% respectively.

Portfolio Growth

TIP vs. USMV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $11,851 4.07%
USMV $10,000 $27,607 13.89%

A $10,000 investment in TIP would have resulted in a final balance of $11,851. This is a profit of $1,851 over 8 years and amounts to a compound annual growth rate (CAGR) of 4.07%.

With a $10,000 investment in USMV, the end total would have been $27,607. This equates to a $17,607 profit over 8 years and a compound annual growth rate (CAGR) of 13.89%.

TIP’s CAGR is 9.82 percentage points lower than that of USMV and as a result, would have yielded $15,756 less on a $10,000 investment. Thus, TIP performed worse than USMV by 9.82% annually.


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