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TIP vs. XLE: What’s The Difference?

The iShares TIPS Bond ETF (TIP) and the Energy Select Sector SPDR Fund (XLE) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and XLE is a SPDR State Street Global Advisors Equity Energy fund. So, what’s the difference between TIP and XLE? And which fund is better?

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

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

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NameiShares TIPS Bond ETFEnergy Select Sector SPDR Fund
CategoryInflation-Protected BondEquity Energy
IssueriSharesSPDR State Street Global Advisors
Avg. Return4.07%1.28%
Div. Yield1.87%3.92%
Expense Ratio0.19%0.12%

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 Energy Select Sector SPDR Fund (XLE) is a Equity Energy fund that is issued by SPDR State Street Global Advisors. It currently has 25.55B total assets under management and has yielded an average annual return of 1.28% over the past 10 years. The fund has a dividend yield of 3.92% with an expense ratio of 0.12%.

TIP’s dividend yield is 2.05% lower than that of XLE (1.87% vs. 3.92%). Also, TIP yielded on average 2.79% more per year over the past decade (4.07% vs. 1.28%). The expense ratio of TIP is 0.07 percentage points higher than XLE’s (0.19% vs. 0.12%).

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Fund Composition


TIP - Holdings

TIP Bond SectorsWeight
Below B0.0%
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.

XLE - Holdings

XLE HoldingsWeight
Exxon Mobil Corp23.7%
Chevron Corp20.03%
EOG Resources Inc4.46%
Schlumberger Ltd4.43%
Marathon Petroleum Corp4.17%
Pioneer Natural Resources Co4.08%
Phillips 664.07%
Kinder Morgan Inc Class P3.85%
Williams Companies Inc3.5%

XLE’s Top Holdings are Exxon Mobil Corp, Chevron Corp, ConocoPhillips, EOG Resources Inc, and Schlumberger Ltd at 23.7%, 20.03%, 4.64%, 4.46%, and 4.43%.

Marathon Petroleum Corp (4.17%), Pioneer Natural Resources Co (4.08%), and Phillips 66 (4.07%) have a slightly smaller but still significant weight. Kinder Morgan Inc Class P and Williams Companies Inc are also represented in the XLE’s holdings at 3.85% and 3.5%.

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Risk Analysis

Mean Return0.280.32
Std. Deviation4.3327.52
Sharpe Ratio0.620.12
Treynor Ratio2.24-0.4

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

The Energy Select Sector SPDR Fund (XLE) has a R-squared of 61.84 with a Mean Return of 0.32 and a Alpha of -11.98. Its Treynor Ratio is -0.4 while XLE’s Standard Deviation is 27.52. Furthermore, the fund has a Sharpe Ratio of 0.12 and a Beta of 1.54.

TIP’s Mean Return is 0.04 points lower than that of XLE and its R-squared is 4.73 points higher. With a Standard Deviation of 4.33, TIP is slightly less volatile than XLE. The Alpha and Beta of TIP are 11.40 points higher and 0.36 points lower than XLE’s Alpha and Beta.

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Annual Returns

TIP vs. XLE - Annual Returns


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 2016 was the strongest year for XLE, returning 27.95% on an annual basis. The poorest year for XLE in the last ten years was 2020, with a yield of -32.56%. Most years the Energy Select Sector SPDR Fund has given investors modest returns, such as in 2017, 2011, and 2012, when gains were -1.01%, 2.98%, and 5.17% respectively.

Portfolio Growth

TIP vs. XLE - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR

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 XLE, the end total would have been $9,339. This equates to a $-661 profit over 11 years and a compound annual growth rate (CAGR) of 1.28%.

TIP’s CAGR is 2.79 percentage points higher than that of XLE and as a result, would have yielded $5,890 more on a $10,000 investment. Thus, TIP outperformed XLE by 2.79% annually.

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