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TIP vs. VLUE: What’s The Difference?

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

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

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

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Summary

TIPVLUE
NameiShares TIPS Bond ETFiShares MSCI USA Value Factor ETF
CategoryInflation-Protected BondLarge Value
IssueriSharesiShares
AUM28.3B15.95B
Avg. Return4.07%8.91%
Div. Yield1.87%1.89%
Expense Ratio0.19%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 Value Factor ETF (VLUE) is a Large Value fund that is issued by iShares. It currently has 15.95B total assets under management and has yielded an average annual return of 8.91% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.15%.

TIP’s dividend yield is 0.02% lower than that of VLUE (1.87% vs. 1.89%). Also, TIP yielded on average 4.84% less per year over the past decade (4.07% vs. 8.91%). The expense ratio of TIP is 0.04 percentage points higher than VLUE’s (0.19% vs. 0.15%).

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Fund Composition

Holdings

TIP - Holdings

TIP Bond SectorsWeight
AAA99.31%
Others0.69%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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.

VLUE - Holdings

VLUE HoldingsWeight
AT&T Inc7.13%
Intel Corp6.14%
General Motors Co3.19%
Micron Technology Inc3.14%
Cisco Systems Inc3.05%
International Business Machines Corp2.76%
Target Corp2.38%
Citigroup Inc2.32%
Ford Motor Co2.23%
Pfizer Inc2.17%

VLUE’s Top Holdings are AT&T Inc, Intel Corp, General Motors Co, Micron Technology Inc, and Cisco Systems Inc at 7.13%, 6.14%, 3.19%, 3.14%, and 3.05%.

International Business Machines Corp (2.76%), Target Corp (2.38%), and Citigroup Inc (2.32%) have a slightly smaller but still significant weight. Ford Motor Co and Pfizer Inc are also represented in the VLUE’s holdings at 2.23% and 2.17%.

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Risk Analysis

TIPVLUE
Mean Return0.280
R-squared66.570
Std. Deviation4.330
Alpha-0.580
Beta1.180
Sharpe Ratio0.620
Treynor Ratio2.240

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

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

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

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Performance

Annual Returns

TIP vs. VLUE - Annual Returns

YearTIPVLUE
202010.91%-0.32%
20198.28%27.47%
2018-1.43%-11.18%
20172.92%21.97%
20164.56%15.68%
2015-1.59%-3.54%
20143.49%12.29%
2013-8.65%0.0%
20126.8%0.0%
201113.4%0.0%
20106.1%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 VLUE, returning 27.47% on an annual basis. The poorest year for VLUE in the last ten years was 2018, with a yield of -11.18%. Most years the iShares MSCI USA Value Factor ETF has given investors modest returns, such as in 2012, 2011, and 2010, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

TIP vs. VLUE - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
TIP$10,000$12,9734.07%
VLUE$10,000$17,2478.91%

A $10,000 investment in TIP would have resulted in a final balance of $12,973. This is a profit of $2,973 over 7 years and amounts to a compound annual growth rate (CAGR) of 4.07%.

With a $10,000 investment in VLUE, the end total would have been $17,247. This equates to a $7,247 profit over 7 years and a compound annual growth rate (CAGR) of 8.91%.

TIP’s CAGR is 4.84 percentage points lower than that of VLUE and as a result, would have yielded $4,274 less on a $10,000 investment. Thus, TIP performed worse than VLUE by 4.84% annually.


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