TIP vs. VOE: What’s The Difference?

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

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

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

Summary

TIP VOE
Name iShares TIPS Bond ETF Vanguard Mid-Cap Value Index Fund ETF Shares
Category Inflation-Protected Bond Mid-Cap Value
Issuer iShares Vanguard
AUM 28.3B 26.78B
Avg. Return 4.07% 12.52%
Div. Yield 1.87% 1.87%
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 Mid-Cap Value Index Fund ETF Shares (VOE) is a Mid-Cap Value fund that is issued by Vanguard. It currently has 26.78B total assets under management and has yielded an average annual return of 12.52% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.07%.

TIP’s dividend yield is 0.00% lower than that of VOE (1.87% vs. 1.87%). Also, TIP yielded on average 8.45% less per year over the past decade (4.07% vs. 12.52%). The expense ratio of TIP is 0.12 percentage points higher than VOE’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.

VOE - Holdings

VOE Holdings Weight
Carrier Global Corp Ordinary Shares 1.28%
International Flavors & Fragrances Inc 1.13%
Motorola Solutions Inc 1.12%
Discover Financial Services 1.09%
Welltower Inc 1.05%
Corteva Inc 0.99%
Valero Energy Corp 0.97%
Corning Inc 0.95%
Willis Towers Watson PLC 0.9%
D.R. Horton Inc 0.89%

VOE’s Top Holdings are Carrier Global Corp Ordinary Shares, International Flavors & Fragrances Inc, Motorola Solutions Inc, Discover Financial Services, and Welltower Inc at 1.28%, 1.13%, 1.12%, 1.09%, and 1.05%.

Corteva Inc (0.99%), Valero Energy Corp (0.97%), and Corning Inc (0.95%) have a slightly smaller but still significant weight. Willis Towers Watson PLC and D.R. Horton Inc are also represented in the VOE’s holdings at 0.9% and 0.89%.

Risk Analysis

TIP VOE
Mean Return 0.28 1.05
R-squared 66.57 88.76
Std. Deviation 4.33 15.98
Alpha -0.58 -3.77
Beta 1.18 1.11
Sharpe Ratio 0.62 0.75
Treynor Ratio 2.24 10.19

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

The Vanguard Mid-Cap Value Index Fund ETF Shares (VOE) has a Sharpe Ratio of 0.75 with a Treynor Ratio of 10.19 and a Alpha of -3.77. Its Standard Deviation is 15.98 while VOE’s Beta is 1.11. Furthermore, the fund has a R-squared of 88.76 and a Mean Return of 1.05.

TIP’s Mean Return is 0.77 points lower than that of VOE and its R-squared is 22.19 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than VOE. The Alpha and Beta of TIP are 3.19 points higher and 0.07 points higher than VOE’s Alpha and Beta.

Performance

Annual Returns

TIP vs. VOE - Annual Returns

Year TIP VOE
2020 10.91% 2.5%
2019 8.28% 27.98%
2018 -1.43% -12.41%
2017 2.92% 17.05%
2016 4.56% 15.26%
2015 -1.59% -1.8%
2014 3.49% 13.98%
2013 -8.65% 37.65%
2012 6.8% 16.04%
2011 13.4% -0.32%
2010 6.1% 21.83%

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 VOE, returning 37.65% on an annual basis. The poorest year for VOE in the last ten years was 2018, with a yield of -12.41%. Most years the Vanguard Mid-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2016, and 2012, when gains were 13.98%, 15.26%, and 16.04% respectively.

Portfolio Growth

TIP vs. VOE - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $15,229 4.07%
VOE $10,000 $33,655 12.52%

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 VOE, the end total would have been $33,655. This equates to a $23,655 profit over 11 years and a compound annual growth rate (CAGR) of 12.52%.

TIP’s CAGR is 8.45 percentage points lower than that of VOE and as a result, would have yielded $18,426 less on a $10,000 investment. Thus, TIP performed worse than VOE by 8.45% annually.


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