TIP vs. VBK: What’s The Difference?

The iShares TIPS Bond ETF (TIP) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and VBK is a Vanguard Small Growth fund. So, what’s the difference between TIP and VBK? And which fund is better?

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

In this article, we’ll compare TIP vs. VBK. 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 VBK’s industry exposure, holdings, and risk metrics and examine how these affect their overall returns.

Summary

TIP VBK
Name iShares TIPS Bond ETF Vanguard Small-Cap Growth Index Fund ETF Shares
Category Inflation-Protected Bond Small Growth
Issuer iShares Vanguard
AUM 28.3B 37.89B
Avg. Return 4.07% 16.53%
Div. Yield 1.87% 0.45%
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 Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.

TIP’s dividend yield is 1.42% higher than that of VBK (1.87% vs. 0.45%). Also, TIP yielded on average 12.46% less per year over the past decade (4.07% vs. 16.53%). The expense ratio of TIP is 0.12 percentage points higher than VBK’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.

VBK - Holdings

VBK Holdings Weight
Charles River Laboratories International Inc 0.78%
Pool Corp 0.73%
Bio-Techne Corp 0.73%
Avantor Inc 0.73%
PerkinElmer Inc 0.72%
Entegris Inc 0.7%
PTC Inc 0.62%
Fair Isaac Corp 0.57%
Bill.com Holdings Inc Ordinary Shares 0.56%
Avalara Inc 0.55%

VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.

Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.

Risk Analysis

TIP VBK
Mean Return 0.28 1.22
R-squared 66.57 80.56
Std. Deviation 4.33 17.95
Alpha -0.58 -2.81
Beta 1.18 1.18
Sharpe Ratio 0.62 0.78
Treynor Ratio 2.24 11.18

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

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Treynor Ratio of 11.18 with a Standard Deviation of 17.95 and a Alpha of -2.81. Its Mean Return is 1.22 while VBK’s Sharpe Ratio is 0.78. Furthermore, the fund has a R-squared of 80.56 and a Beta of 1.18.

TIP’s Mean Return is 0.94 points lower than that of VBK and its R-squared is 13.99 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than VBK. The Alpha and Beta of TIP are 2.23 points higher and 0.00 points lower than VBK’s Alpha and Beta.

Performance

Annual Returns

TIP vs. VBK - Annual Returns

Year TIP VBK
2020 10.91% 35.29%
2019 8.28% 32.75%
2018 -1.43% -5.68%
2017 2.92% 21.9%
2016 4.56% 10.74%
2015 -1.59% -2.51%
2014 3.49% 4.02%
2013 -8.65% 38.18%
2012 6.8% 17.67%
2011 13.4% -1.43%
2010 6.1% 30.87%

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 VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% respectively.

Portfolio Growth

TIP vs. VBK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $15,229 4.07%
VBK $10,000 $48,639 16.53%

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 VBK, the end total would have been $48,639. This equates to a $38,639 profit over 11 years and a compound annual growth rate (CAGR) of 16.53%.

TIP’s CAGR is 12.46 percentage points lower than that of VBK and as a result, would have yielded $33,410 less on a $10,000 investment. Thus, TIP performed worse than VBK by 12.46% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply