Skip to content

TIP vs. VT: What’s The Difference?

The iShares TIPS Bond ETF (TIP) and the Vanguard Total World Stock Index Fund ETF Shares (VT) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and VT is a Vanguard N/A fund. So, what’s the difference between TIP and VT? And which fund is better?

The expense ratio of TIP is 0.11 percentage points higher than VT’s (0.19% vs. 0.08%). TIP is mostly comprised of AAA bonds while VT has a high exposure to the technology sector. Overall, TIP has provided lower returns than VT over the past ten years.

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

TIP: Keep track of all your investments with Personal Capital. I use this amazing tool to aggregate all investments in one place and make sure I'm on track to financial freedom. Oh, and did I mention it's free? Try it out here (link to Personal Capital).

Summary

TIPVT
NameiShares TIPS Bond ETFVanguard Total World Stock Index Fund ETF Shares
CategoryInflation-Protected BondN/A
IssueriSharesVanguard
AUM28.3B30.44B
Avg. Return4.07%10.42%
Div. Yield1.87%1.65%
Expense Ratio0.19%0.08%

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 Total World Stock Index Fund ETF Shares (VT) is a N/A fund that is issued by Vanguard. It currently has 30.44B total assets under management and has yielded an average annual return of 10.42% over the past 10 years. The fund has a dividend yield of 1.65% with an expense ratio of 0.08%.

TIP’s dividend yield is 0.22% higher than that of VT (1.87% vs. 1.65%). Also, TIP yielded on average 6.34% less per year over the past decade (4.07% vs. 10.42%). The expense ratio of TIP is 0.11 percentage points higher than VT’s (0.19% vs. 0.08%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

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.

VT - Holdings

VT HoldingsWeight
Apple Inc2.85%
Microsoft Corp2.71%
Amazon.com Inc1.98%
Facebook Inc Class A1.1%
Alphabet Inc Class A0.97%
Alphabet Inc Class C0.95%
Tesla Inc0.7%
NVIDIA Corp0.64%
JPMorgan Chase & Co0.62%
Tencent Holdings Ltd0.6%

VT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 2.85%, 2.71%, 1.98%, 1.1%, and 0.97%.

Alphabet Inc Class C (0.95%), Tesla Inc (0.7%), and NVIDIA Corp (0.64%) have a slightly smaller but still significant weight. JPMorgan Chase & Co and Tencent Holdings Ltd are also represented in the VT’s holdings at 0.62% and 0.6%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

TIPVT
Mean Return0.280.9
R-squared66.5799.35
Std. Deviation4.3314.19
Alpha-0.580.2
Beta1.181.01
Sharpe Ratio0.620.71
Treynor Ratio2.249.5

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

The Vanguard Total World Stock Index Fund ETF Shares (VT) has a Mean Return of 0.9 with a Beta of 1.01 and a R-squared of 99.35. Its Sharpe Ratio is 0.71 while VT’s Alpha is 0.2. Furthermore, the fund has a Standard Deviation of 14.19 and a Treynor Ratio of 9.5.

TIP’s Mean Return is 0.62 points lower than that of VT and its R-squared is 32.78 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than VT. The Alpha and Beta of TIP are 0.78 points lower and 0.17 points higher than VT’s Alpha and Beta.

FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!

Performance

Annual Returns

TIP vs. VT - Annual Returns

YearTIPVT
202010.91%16.74%
20198.28%26.8%
2018-1.43%-9.67%
20172.92%24.19%
20164.56%8.77%
2015-1.59%-1.88%
20143.49%3.97%
2013-8.65%22.98%
20126.8%17.33%
201113.4%-7.71%
20106.1%13.05%

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 VT, returning 26.8% on an annual basis. The poorest year for VT in the last ten years was 2018, with a yield of -9.67%. Most years the Vanguard Total World Stock Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were 8.77%, 13.05%, and 16.74% respectively.

Portfolio Growth

TIP vs. VT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
TIP$10,000$15,2294.07%
VT$10,000$27,73910.42%

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 VT, the end total would have been $27,739. This equates to a $17,739 profit over 11 years and a compound annual growth rate (CAGR) of 10.42%.

TIP’s CAGR is 6.34 percentage points lower than that of VT and as a result, would have yielded $12,510 less on a $10,000 investment. Thus, TIP performed worse than VT by 6.34% 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)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!

2) 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!

3) 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!).

4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.

5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!

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

Leave a Reply

Your email address will not be published.