Skip to content

VBR vs. VTIP: What’s The Difference?

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. VBR is a Vanguard Small Value fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between VBR and VTIP? And which fund is better?

The expense ratio of VBR is 0.02 percentage points higher than VTIP’s (0.07% vs. 0.05%). VBR also has a high exposure to the financial services sector while VTIP is mostly comprised of AAA bonds. Overall, VBR has provided higher returns than VTIP over the past 7 years.

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

TIP: Keep track of all your investments with Personal Capital. I use this amazing tool to aggregate all investments in one place and make sure I'm on track to financial freedom. Oh, and did I mention it's free? Try it out here (link to Personal Capital).

Summary

VBRVTIP
NameVanguard Small-Cap Value Index Fund ETF SharesVanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares
CategorySmall ValueInflation-Protected Bond
IssuerVanguardVanguard
AUM48.08B50.67B
Avg. Return12.28%1.79%
Div. Yield1.6%1.35%
Expense Ratio0.07%0.05%

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.

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%.

VBR’s dividend yield is 0.25% higher than that of VTIP (1.6% vs. 1.35%). Also, VBR yielded on average 10.49% more per year over the past decade (12.28% vs. 1.79%). The expense ratio of VBR is 0.02 percentage points higher than VTIP’s (0.07% vs. 0.05%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Holdings

VBR - Holdings

VBR HoldingsWeight
Diamondback Energy Inc0.55%
VICI Properties Inc Ordinary Shares0.54%
IDEX Corp0.54%
Nuance Communications Inc0.5%
Molina Healthcare Inc0.48%
Signature Bank0.46%
Novavax Inc0.44%
Howmet Aerospace Inc0.44%
Apollo Global Management Inc Class A0.42%
Brown & Brown Inc0.41%

VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.

Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.

VTIP - Holdings

VTIP Bond SectorsWeight
AAA99.87%
Others0.13%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

VBRVTIP
Mean Return1.080
R-squared82.20
Std. Deviation18.370
Alpha-5.090
Beta1.230
Sharpe Ratio0.670
Treynor Ratio9.150

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Mean Return of 1.08 with a Beta of 1.23 and a Sharpe Ratio of 0.67. Its Treynor Ratio is 9.15 while VBR’s R-squared is 82.2. Furthermore, the fund has a Alpha of -5.09 and a Standard Deviation of 18.37.

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a Sharpe Ratio of 0 with a Mean Return of 0 and a Beta of 0. Its R-squared is 0 while VTIP’s Alpha is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Standard Deviation of 0.

VBR’s Mean Return is 1.08 points higher than that of VTIP and its R-squared is 82.20 points higher. With a Standard Deviation of 18.37, VBR is slightly more volatile than VTIP. The Alpha and Beta of VBR are 5.09 points lower and 1.23 points higher than VTIP’s Alpha and Beta.

FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!

Performance

Annual Returns

VBR vs. VTIP - Annual Returns

YearVBRVTIP
20205.82%4.97%
201922.76%4.83%
2018-12.22%0.54%
201711.79%0.82%
201624.8%2.71%
2015-4.67%-0.15%
201410.55%-1.17%
201336.57%-1.55%
201218.78%0.0%
2011-4.05%0.0%
201024.97%0.0%

VBR had its best year in 2013 with an annual return of 36.57%. VBR’s worst year over the past decade yielded -12.22% and occurred in 2018. In most years the Vanguard Small-Cap Value Index Fund ETF Shares provided moderate returns such as in 2014, 2017, and 2012 where annual returns amounted to 10.55%, 11.79%, and 18.78% 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

VBR vs. VTIP - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VBR$10,000$16,76512.28%
VTIP$10,000$11,3051.79%

A $10,000 investment in VBR would have resulted in a final balance of $16,765. This is a profit of $6,765 over 7 years and amounts to a compound annual growth rate (CAGR) of 12.28%.

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%.

VBR’s CAGR is 10.49 percentage points higher than that of VTIP and as a result, would have yielded $5,460 more on a $10,000 investment. Thus, VBR outperformed VTIP by 10.49% annually.


Current recommendations:

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)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!

2) 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!

3) 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!).

4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.

5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply

Your email address will not be published.