The Vanguard Small-Cap Index Fund ETF Shares (VB) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. VB is a Vanguard Small Blend fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between VB and VTIP? And which fund is better?
VB and VTIP have the same expense ratio: 0.05%. VB also has a high exposure to the technology sector while VTIP is mostly comprised of AAA bonds. Overall, VB has provided higher returns than VTIP over the past ten years.
In this article, we’ll compare VB vs. VTIP. We’ll look at industry exposure and holdings, as well as at their annual returns and performance. Moreover, I’ll also discuss VB’s and VTIP’s risk metrics, portfolio growth, and fund composition and examine how these affect their overall returns.
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Summary
| VB | VTIP | |
| Name | Vanguard Small-Cap Index Fund ETF Shares | Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares |
| Category | Small Blend | Inflation-Protected Bond |
| Issuer | Vanguard | Vanguard |
| AUM | 137.72B | 50.67B |
| Avg. Return | 14.25% | 1.79% |
| Div. Yield | 1.14% | 1.35% |
| Expense Ratio | 0.05% | 0.05% |
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 Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.
VB’s dividend yield is 0.21% lower than that of VTIP (1.14% vs. 1.35%). Also, VB yielded on average 12.46% more per year over the past decade (14.25% vs. 1.79%). VB and VTIP have the same expense ratio: 0.05%.
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Fund Composition
Holdings
| VB Holdings | Weight |
| Charles River Laboratories International Inc | 0.34% |
| Pool Corp | 0.32% |
| Bio-Techne Corp | 0.32% |
| Avantor Inc | 0.32% |
| PerkinElmer Inc | 0.31% |
| Diamondback Energy Inc | 0.31% |
| VICI Properties Inc Ordinary Shares | 0.3% |
| IDEX Corp | 0.3% |
| Entegris Inc | 0.3% |
| Novavax Inc | 0.29% |
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%.
| VTIP Bond Sectors | Weight |
| AAA | 99.87% |
| Others | 0.13% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 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.
Risk Analysis
| VB | VTIP | |
| Mean Return | 1.15 | 0 |
| R-squared | 85.03 | 0 |
| Std. Deviation | 17.82 | 0 |
| Alpha | -4.02 | 0 |
| Beta | 1.21 | 0 |
| Sharpe Ratio | 0.74 | 0 |
| Treynor Ratio | 10.15 | 0 |
The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Beta of 1.21 with a Standard Deviation of 17.82 and a Alpha of -4.02. Its Sharpe Ratio is 0.74 while VB’s R-squared is 85.03. Furthermore, the fund has a Treynor Ratio of 10.15 and a Mean Return of 1.15.
The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a Treynor Ratio of 0 with a Sharpe Ratio of 0 and a Beta of 0. Its Alpha is 0 while VTIP’s Mean Return is 0. Furthermore, the fund has a Standard Deviation of 0 and a R-squared of 0.
VB’s Mean Return is 1.15 points higher than that of VTIP and its R-squared is 85.03 points higher. With a Standard Deviation of 17.82, VB is slightly more volatile than VTIP. The Alpha and Beta of VB are 4.02 points lower and 1.21 points higher than VTIP’s Alpha and Beta.
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Performance
Annual Returns
| Year | VB | VTIP |
| 2020 | 19.08% | 4.97% |
| 2019 | 27.37% | 4.83% |
| 2018 | -9.3% | 0.54% |
| 2017 | 16.24% | 0.82% |
| 2016 | 18.31% | 2.71% |
| 2015 | -3.65% | -0.15% |
| 2014 | 7.51% | -1.17% |
| 2013 | 37.8% | -1.55% |
| 2012 | 18.22% | 0.0% |
| 2011 | -2.68% | 0.0% |
| 2010 | 27.89% | 0.0% |
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 2020 was the strongest year for VTIP, returning 4.97% on an annual basis. The poorest year for VTIP in the last ten years was 2013, with a yield of -1.55%. Most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 0.54% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VB | $10,000 | $19,597 | 14.25% |
| VTIP | $10,000 | $11,305 | 1.79% |
A $10,000 investment in VB would have resulted in a final balance of $19,597. This is a profit of $9,597 over 7 years and amounts to a compound annual growth rate (CAGR) of 14.25%.
With a $10,000 investment in VTIP, the end total would have been $11,305. This equates to a $1,305 profit over 7 years and a compound annual growth rate (CAGR) of 1.79%.
VB’s CAGR is 12.46 percentage points higher than that of VTIP and as a result, would have yielded $8,292 more on a $10,000 investment. Thus, VB outperformed VTIP by 12.46% annually.
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