The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the iShares TIPS Bond ETF (TIP) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and TIP is a iShares Inflation-Protected Bond fund. So, what’s the difference between VO and TIP? And which fund is better?
The expense ratio of VO is 0.15 percentage points lower than TIP’s (0.04% vs. 0.19%). VO also has a high exposure to the technology sector while TIP is mostly comprised of AAA bonds. Overall, VO has provided higher returns than TIP over the past ten years.
In this article, we’ll compare VO vs. TIP. We’ll look at performance and fund composition, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss VO’s and TIP’s holdings, risk metrics, and annual returns and examine how these affect their overall returns.
|Name||Vanguard Mid-Cap Index Fund ETF Shares||iShares TIPS Bond ETF|
|Category||Mid-Cap Blend||Inflation-Protected Bond|
The Vanguard Mid-Cap Index Fund ETF Shares (VO) is a Mid-Cap Blend fund that is issued by Vanguard. It currently has 154.08B total assets under management and has yielded an average annual return of 14.34% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.04%.
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%.
VO’s dividend yield is 0.64% lower than that of TIP (1.23% vs. 1.87%). Also, VO yielded on average 10.26% more per year over the past decade (14.34% vs. 4.07%). The expense ratio of VO is 0.15 percentage points lower than TIP’s (0.04% vs. 0.19%).
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|IDEXX Laboratories Inc||0.78%|
|Marvell Technology Inc||0.68%|
|IQVIA Holdings Inc||0.68%|
|Chipotle Mexican Grill Inc||0.63%|
|Veeva Systems Inc Class A||0.62%|
|Digital Realty Trust Inc||0.62%|
|Carrier Global Corp Ordinary Shares||0.61%|
VO’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Marvell Technology Inc, IQVIA Holdings Inc, and Chipotle Mexican Grill Inc at 0.78%, 0.75%, 0.68%, 0.68%, and 0.63%.
Veeva Systems Inc Class A (0.62%), Digital Realty Trust Inc (0.62%), and Centene Corp (0.62%) have a slightly smaller but still significant weight. Aptiv PLC and Carrier Global Corp Ordinary Shares are also represented in the VO’s holdings at 0.62% and 0.61%.
|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.
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The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a R-squared of 92.22 with a Treynor Ratio of 11.32 and a Beta of 1.11. Its Standard Deviation is 15.65 while VO’s Mean Return is 1.14. Furthermore, the fund has a Alpha of -2.71 and a Sharpe Ratio of 0.83.
The iShares TIPS Bond ETF (TIP) has a Mean Return of 0.28 with a Sharpe Ratio of 0.62 and a Treynor Ratio of 2.24. Its Beta is 1.18 while TIP’s Standard Deviation is 4.33. Furthermore, the fund has a R-squared of 66.57 and a Alpha of -0.58.
VO’s Mean Return is 0.86 points higher than that of TIP and its R-squared is 25.65 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than TIP. The Alpha and Beta of VO are 2.13 points lower and 0.07 points lower than TIP’s Alpha and Beta.
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VO had its best year in 2013 with an annual return of 35.15%. VO’s worst year over the past decade yielded -9.21% and occurred in 2018. In most years the Vanguard Mid-Cap Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2020 where annual returns amounted to 13.76%, 15.98%, and 18.22% 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 VO would have resulted in a final balance of $40,404. This is a profit of $30,404 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.34%.
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%.
VO’s CAGR is 10.26 percentage points higher than that of TIP and as a result, would have yielded $25,175 more on a $10,000 investment. Thus, VO outperformed TIP by 10.26% annually.
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