The Vanguard Small-Cap Index Fund ETF Shares (VB) and the iShares TIPS Bond ETF (TIP) are both among the Top 100 ETFs. VB is a Vanguard Small Blend fund and TIP is a iShares Inflation-Protected Bond fund. So, what’s the difference between VB and TIP? And which fund is better?
The expense ratio of VB is 0.14 percentage points lower than TIP’s (0.05% vs. 0.19%). VB also has a high exposure to the technology sector while TIP is mostly comprised of AAA bonds. Overall, VB has provided higher returns than TIP over the past ten years.
In this article, we’ll compare VB vs. TIP. We’ll look at holdings and fund composition, as well as at their portfolio growth and risk metrics. Moreover, I’ll also discuss VB’s and TIP’s industry exposure, performance, and annual returns and examine how these affect their overall returns.
|NameVanguard Small-Cap Index Fund ETF SharesiShares TIPS Bond ETF|
|Category||Small Blend||Inflation-Protected Bond|
The Vanguard Small-Cap Index Fund ETF Shares (VB) is a Small Blend fund that is issued by Vanguard. It currently has 137.72B total assets under management and has yielded an average annual return of 14.25% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.05%.
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%.
VB’s dividend yield is 0.73% lower than that of TIP (1.14% vs. 1.87%). Also, VB yielded on average 10.18% more per year over the past decade (14.25% vs. 4.07%). The expense ratio of VB is 0.14 percentage points lower than TIP’s (0.05% vs. 0.19%).
|Charles River Laboratories International Inc||0.34%|
|Diamondback Energy Inc||0.31%|
|VICI Properties Inc Ordinary Shares||0.3%|
VB’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.34%, 0.32%, 0.32%, 0.32%, and 0.31%.
Diamondback Energy Inc (0.31%), VICI Properties Inc Ordinary Shares (0.3%), and IDEX Corp (0.3%) have a slightly smaller but still significant weight. Entegris Inc and Novavax Inc are also represented in the VB’s holdings at 0.3% and 0.29%.
|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.
The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Standard Deviation of 17.82 with a Treynor Ratio of 10.15 and a R-squared of 85.03. Its Sharpe Ratio is 0.74 while VB’s Beta is 1.21. Furthermore, the fund has a Alpha of -4.02 and a Mean Return of 1.15.
The iShares TIPS Bond ETF (TIP) has a Mean Return of 0.28 with a R-squared of 66.57 and a Beta of 1.18. Its Alpha is -0.58 while TIP’s Sharpe Ratio is 0.62. Furthermore, the fund has a Standard Deviation of 4.33 and a Treynor Ratio of 2.24.
VB’s Mean Return is 0.87 points higher than that of TIP and its R-squared is 18.46 points higher. With a Standard Deviation of 17.82, VB is slightly more volatile than TIP. The Alpha and Beta of VB are 3.44 points lower and 0.03 points higher than TIP’s Alpha and Beta.
VB had its best year in 2013 with an annual return of 37.8%. VB’s worst year over the past decade yielded -9.3% and occurred in 2018. In most years the Vanguard Small-Cap Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2016 where annual returns amounted to 16.24%, 18.22%, and 18.31% respectively.
The year 2011 was the strongest year for TIP, returning 13.4% on an annual basis. The poorest year for TIP in the last ten years was 2013, with a yield of -8.65%. Most years the iShares TIPS Bond ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were 3.49%, 4.56%, and 6.1% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VB would have resulted in a final balance of $39,734. This is a profit of $29,734 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.25%.
With a $10,000 investment in TIP, the end total would have been $15,229. This equates to a $5,229 profit over 11 years and a compound annual growth rate (CAGR) of 4.07%.
VB’s CAGR is 10.18 percentage points higher than that of TIP and as a result, would have yielded $24,505 more on a $10,000 investment. Thus, VB outperformed TIP by 10.18% annually.
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