TIP vs. VV: What’s The Difference?

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

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

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

Summary

TIP VV
Name iShares TIPS Bond ETF Vanguard Large-Cap Index Fund ETF Shares
Category Inflation-Protected Bond Large Blend
Issuer iShares Vanguard
AUM 28.3B 37.65B
Avg. Return 4.07% 14.75%
Div. Yield 1.87% 1.26%
Expense Ratio 0.19% 0.04%

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 Large-Cap Index Fund ETF Shares (VV) is a Large Blend fund that is issued by Vanguard. It currently has 37.65B total assets under management and has yielded an average annual return of 14.75% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.04%.

TIP’s dividend yield is 0.61% higher than that of VV (1.87% vs. 1.26%). Also, TIP yielded on average 10.67% less per year over the past decade (4.07% vs. 14.75%). The expense ratio of TIP is 0.15 percentage points higher than VV’s (0.19% vs. 0.04%).

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.

VV - Holdings

VV Holdings Weight
Apple Inc 5.7%
Microsoft Corp 5.35%
Amazon.com Inc 3.87%
Facebook Inc Class A 2.19%
Alphabet Inc Class A 1.93%
Alphabet Inc Class C 1.81%
Tesla Inc 1.37%
Berkshire Hathaway Inc Class B 1.3%
NVIDIA Corp 1.24%
JPMorgan Chase & Co 1.24%

VV’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.7%, 5.35%, 3.87%, 2.19%, and 1.93%.

Alphabet Inc Class C (1.81%), Tesla Inc (1.37%), and Berkshire Hathaway Inc Class B (1.3%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VV’s holdings at 1.24% and 1.24%.

Risk Analysis

TIP VV
Mean Return 0.28 1.24
R-squared 66.57 99.86
Std. Deviation 4.33 13.75
Alpha -0.58 -0.08
Beta 1.18 1.01
Sharpe Ratio 0.62 1.04
Treynor Ratio 2.24 14.14

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

The Vanguard Large-Cap Index Fund ETF Shares (VV) has a Sharpe Ratio of 1.04 with a Mean Return of 1.24 and a Treynor Ratio of 14.14. Its Alpha is -0.08 while VV’s R-squared is 99.86. Furthermore, the fund has a Beta of 1.01 and a Standard Deviation of 13.75.

TIP’s Mean Return is 0.96 points lower than that of VV and its R-squared is 33.29 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than VV. The Alpha and Beta of TIP are 0.50 points lower and 0.17 points higher than VV’s Alpha and Beta.

Performance

Annual Returns

TIP vs. VV - Annual Returns

Year TIP VV
2020 10.91% 20.99%
2019 8.28% 31.39%
2018 -1.43% -4.44%
2017 2.92% 22.03%
2016 4.56% 11.65%
2015 -1.59% 1.07%
2014 3.49% 13.39%
2013 -8.65% 32.65%
2012 6.8% 16.09%
2011 13.4% 1.58%
2010 6.1% 15.81%

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 VV, returning 32.65% on an annual basis. The poorest year for VV in the last ten years was 2018, with a yield of -4.44%. Most years the Vanguard Large-Cap Index Fund ETF Shares has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.39%, 15.81%, and 16.09% respectively.

Portfolio Growth

TIP vs. VV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $15,229 4.07%
VV $10,000 $42,970 14.75%

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 VV, the end total would have been $42,970. This equates to a $32,970 profit over 11 years and a compound annual growth rate (CAGR) of 14.75%.

TIP’s CAGR is 10.67 percentage points lower than that of VV and as a result, would have yielded $27,741 less on a $10,000 investment. Thus, TIP performed worse than VV by 10.67% annually.


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