The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the iShares TIPS Bond ETF (TIP) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and TIP is a iShares Inflation-Protected Bond fund. So, what’s the difference between VEU and TIP? And which fund is better?
The expense ratio of VEU is 0.11 percentage points lower than TIP’s (0.08% vs. 0.19%). VEU also has a high exposure to the financial services sector while TIP is mostly comprised of AAA bonds. Overall, VEU has provided higher returns than TIP over the past ten years.
In this article, we’ll compare VEU vs. TIP. We’ll look at portfolio growth and annual returns, as well as at their industry exposure and performance. Moreover, I’ll also discuss VEU’s and TIP’s holdings, fund composition, and risk metrics and examine how these affect their overall returns.
|Name||Vanguard FTSE All-World ex-US Index Fund ETF Shares||iShares TIPS Bond ETF|
|Category||Foreign Large Blend||Inflation-Protected Bond|
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.
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%.
VEU’s dividend yield is 0.44% higher than that of TIP (2.31% vs. 1.87%). Also, VEU yielded on average 2.57% more per year over the past decade (6.64% vs. 4.07%). The expense ratio of VEU is 0.11 percentage points lower than TIP’s (0.08% vs. 0.19%).
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).
|Tencent Holdings Ltd||1.57%|
|Alibaba Group Holding Ltd Ordinary Shares||1.4%|
|Taiwan Semiconductor Manufacturing Co Ltd||0.98%|
|ASML Holding NV||0.95%|
|Taiwan Semiconductor Manufacturing Co Ltd ADR||0.91%|
|Roche Holding AG||0.91%|
|Toyota Motor Corp||0.75%|
|LVMH Moet Hennessy Louis Vuitton SE||0.68%|
VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.
Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.
|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.
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).
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Standard Deviation of 15.08 with a R-squared of 98.44 and a Mean Return of 0.56. Its Treynor Ratio is 5.12 while VEU’s Alpha is 0.28. Furthermore, the fund has a Beta of 0.99 and a Sharpe Ratio of 0.4.
The iShares TIPS Bond ETF (TIP) has a Beta of 1.18 with a Mean Return of 0.28 and a Treynor Ratio of 2.24. Its Standard Deviation is 4.33 while TIP’s Alpha is -0.58. Furthermore, the fund has a R-squared of 66.57 and a Sharpe Ratio of 0.62.
VEU’s Mean Return is 0.28 points higher than that of TIP and its R-squared is 31.87 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than TIP. The Alpha and Beta of VEU are 0.86 points higher and 0.19 points lower than TIP’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!
VEU had its best year in 2017 with an annual return of 27.27%. VEU’s worst year over the past decade yielded -14.25% and occurred in 2011. In most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares provided moderate returns such as in 2016, 2020, and 2010 where annual returns amounted to 4.77%, 11.39%, and 11.85% 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 VEU would have resulted in a final balance of $18,507. This is a profit of $8,507 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.64%.
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%.
VEU’s CAGR is 2.57 percentage points higher than that of TIP and as a result, would have yielded $3,278 more on a $10,000 investment. Thus, VEU outperformed TIP by 2.57% annually.
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.