The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the iShares TIPS Bond ETF (TIP) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and TIP is a iShares Inflation-Protected Bond fund. So, what’s the difference between VEA and TIP? And which fund is better?
The expense ratio of VEA is 0.14 percentage points lower than TIP’s (0.05% vs. 0.19%). VEA also has a high exposure to the financial services sector while TIP is mostly comprised of AAA bonds. Overall, VEA has provided higher returns than TIP over the past ten years.
In this article, we’ll compare VEA vs. TIP. We’ll look at portfolio growth and performance, as well as at their risk metrics and annual returns. Moreover, I’ll also discuss VEA’s and TIP’s industry exposure, holdings, and fund composition and examine how these affect their overall returns.
|Name||Vanguard FTSE Developed Markets Index Fund ETF Shares||iShares TIPS Bond ETF|
|Category||Foreign Large Blend||Inflation-Protected Bond|
The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 157.48B total assets under management and has yielded an average annual return of 7.05% over the past 10 years. The fund has a dividend yield of 2.49% 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%.
VEA’s dividend yield is 0.62% higher than that of TIP (2.49% vs. 1.87%). Also, VEA yielded on average 2.98% more per year over the past decade (7.05% vs. 4.07%). The expense ratio of VEA is 0.14 percentage points lower than TIP’s (0.05% vs. 0.19%).
|Samsung Electronics Co Ltd||1.4%|
|ASML Holding NV||1.16%|
|Roche Holding AG||1.1%|
|Toyota Motor Corp||0.92%|
|LVMH Moet Hennessy Louis Vuitton SE||0.84%|
|Shopify Inc A||0.7%|
VEA’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.5%, 1.4%, 1.16%, 1.1%, and 0.92%.
LVMH Moet Hennessy Louis Vuitton SE (0.84%), Novartis AG (0.82%), and Shopify Inc A (0.7%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the VEA’s holdings at 0.67% and 0.66%.
|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.
VEA had its best year in 2017 with an annual return of 26.44%. VEA’s worst year over the past decade yielded -14.47% and occurred in 2018. In most years the Vanguard FTSE Developed Markets Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 2.51%, 8.47%, and 10.29% 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 VEA would have resulted in a final balance of $19,290. This is a profit of $9,290 over 11 years and amounts to a compound annual growth rate (CAGR) of 7.05%.
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%.
VEA’s CAGR is 2.98 percentage points higher than that of TIP and as a result, would have yielded $4,061 more on a $10,000 investment. Thus, VEA outperformed TIP by 2.98% annually.
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