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.
|Name||iShares TIPS Bond ETF||Vanguard Large-Cap Index Fund ETF Shares|
|Category||Inflation-Protected Bond||Large Blend|
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%).
|TIP Bond Sectors||Weight|
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.
|Facebook Inc Class A||2.19%|
|Alphabet Inc Class A||1.93%|
|Alphabet Inc Class C||1.81%|
|Berkshire Hathaway Inc Class B||1.3%|
|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%.
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.
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.
|Fund||Initial Balance||Final Balance||CAGR|
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.
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.