TIP vs. VXF: What’s The Difference?

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

The expense ratio of TIP is 0.13 percentage points higher than VXF’s (0.19% vs. 0.06%). TIP is mostly comprised of AAA bonds while VXF has a high exposure to the technology sector. Overall, TIP has provided lower returns than VXF over the past ten years.

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

Summary

TIP VXF
Name iShares TIPS Bond ETF Vanguard Extended Market Index Fund ETF Shares
Category Inflation-Protected Bond Mid-Cap Growth
Issuer iShares Vanguard
AUM 28.3B 114.53B
Avg. Return 4.07% 15.47%
Div. Yield 1.87% 1.19%
Expense Ratio 0.19% 0.06%

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 Extended Market Index Fund ETF Shares (VXF) is a Mid-Cap Growth fund that is issued by Vanguard. It currently has 114.53B total assets under management and has yielded an average annual return of 15.47% over the past 10 years. The fund has a dividend yield of 1.19% with an expense ratio of 0.06%.

TIP’s dividend yield is 0.68% higher than that of VXF (1.87% vs. 1.19%). Also, TIP yielded on average 11.40% less per year over the past decade (4.07% vs. 15.47%). The expense ratio of TIP is 0.13 percentage points higher than VXF’s (0.19% vs. 0.06%).

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.

VXF - Holdings

VXF Holdings Weight
Square Inc A 1.2%
Zoom Video Communications Inc 1.04%
Uber Technologies Inc 0.93%
Moderna Inc 0.9%
Blackstone Group Inc 0.83%
Snap Inc Class A 0.8%
Twilio Inc A 0.73%
DocuSign Inc 0.68%
CrowdStrike Holdings Inc Class A 0.63%
Marvell Technology Inc 0.6%

VXF’s Top Holdings are Square Inc A, Zoom Video Communications Inc, Uber Technologies Inc, Moderna Inc, and Blackstone Group Inc at 1.2%, 1.04%, 0.93%, 0.9%, and 0.83%.

Snap Inc Class A (0.8%), Twilio Inc A (0.73%), and DocuSign Inc (0.68%) have a slightly smaller but still significant weight. CrowdStrike Holdings Inc Class A and Marvell Technology Inc are also represented in the VXF’s holdings at 0.63% and 0.6%.

Risk Analysis

TIP VXF
Mean Return 0.28 1.24
R-squared 66.57 85.73
Std. Deviation 4.33 18.04
Alpha -0.58 -3.26
Beta 1.18 1.23
Sharpe Ratio 0.62 0.79
Treynor Ratio 2.24 10.92

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

The Vanguard Extended Market Index Fund ETF Shares (VXF) has a Alpha of -3.26 with a Beta of 1.23 and a Standard Deviation of 18.04. Its R-squared is 85.73 while VXF’s Mean Return is 1.24. Furthermore, the fund has a Sharpe Ratio of 0.79 and a Treynor Ratio of 10.92.

TIP’s Mean Return is 0.96 points lower than that of VXF and its R-squared is 19.16 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than VXF. The Alpha and Beta of TIP are 2.68 points higher and 0.05 points lower than VXF’s Alpha and Beta.

Performance

Annual Returns

TIP vs. VXF - Annual Returns

Year TIP VXF
2020 10.91% 32.19%
2019 8.28% 28.04%
2018 -1.43% -9.37%
2017 2.92% 18.1%
2016 4.56% 16.16%
2015 -1.59% -3.26%
2014 3.49% 7.55%
2013 -8.65% 38.37%
2012 6.8% 18.48%
2011 13.4% -3.61%
2010 6.1% 27.55%

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 VXF, returning 38.37% on an annual basis. The poorest year for VXF in the last ten years was 2018, with a yield of -9.37%. Most years the Vanguard Extended Market Index Fund ETF Shares has given investors modest returns, such as in 2016, 2017, and 2012, when gains were 16.16%, 18.1%, and 18.48% respectively.

Portfolio Growth

TIP vs. VXF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $15,229 4.07%
VXF $10,000 $44,130 15.47%

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 VXF, the end total would have been $44,130. This equates to a $34,130 profit over 11 years and a compound annual growth rate (CAGR) of 15.47%.

TIP’s CAGR is 11.40 percentage points lower than that of VXF and as a result, would have yielded $28,901 less on a $10,000 investment. Thus, TIP performed worse than VXF by 11.40% annually.


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