VO vs. VTIP: What’s The Difference?

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

The expense ratio of VO is 0.01 percentage points lower than VTIP’s (0.04% vs. 0.05%). VO also has a high exposure to the technology sector while VTIP is mostly comprised of AAA bonds. Overall, VO has provided higher returns than VTIP over the past ten years.

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

Summary

VO VTIP
Name Vanguard Mid-Cap Index Fund ETF Shares Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares
Category Mid-Cap Blend Inflation-Protected Bond
Issuer Vanguard Vanguard
AUM 154.08B 50.67B
Avg. Return 14.34% 1.79%
Div. Yield 1.23% 1.35%
Expense Ratio 0.04% 0.05%

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 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%.

VO’s dividend yield is 0.12% lower than that of VTIP (1.23% vs. 1.35%). Also, VO yielded on average 12.54% more per year over the past decade (14.34% vs. 1.79%). The expense ratio of VO is 0.01 percentage points lower than VTIP’s (0.04% vs. 0.05%).

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Fund Composition

Holdings

VO - Holdings

VO Holdings Weight
IDEXX Laboratories Inc 0.78%
DocuSign Inc 0.75%
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%
Centene Corp 0.62%
Aptiv PLC 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%.

VTIP - Holdings

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.

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Risk Analysis

VO VTIP
Mean Return 1.14 0
R-squared 92.22 0
Std. Deviation 15.65 0
Alpha -2.71 0
Beta 1.11 0
Sharpe Ratio 0.83 0
Treynor Ratio 11.32 0

The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a Mean Return of 1.14 with a R-squared of 92.22 and a Standard Deviation of 15.65. Its Alpha is -2.71 while VO’s Treynor Ratio is 11.32. Furthermore, the fund has a Beta of 1.11 and a Sharpe Ratio of 0.83.

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

VO’s Mean Return is 1.14 points higher than that of VTIP and its R-squared is 92.22 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than VTIP. The Alpha and Beta of VO are 2.71 points lower and 1.11 points higher than VTIP’s Alpha and Beta.

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Performance

Annual Returns

VO vs. VTIP - Annual Returns

Year VO VTIP
2020 18.22% 4.97%
2019 31.04% 4.83%
2018 -9.21% 0.54%
2017 19.25% 0.82%
2016 11.23% 2.71%
2015 -1.34% -0.15%
2014 13.76% -1.17%
2013 35.15% -1.55%
2012 15.98% 0.0%
2011 -1.96% 0.0%
2010 25.57% 0.0%

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 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

VO vs. VTIP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VO $10,000 $20,938 14.34%
VTIP $10,000 $11,305 1.79%

A $10,000 investment in VO would have resulted in a final balance of $20,938. This is a profit of $10,938 over 7 years and amounts to a compound annual growth rate (CAGR) of 14.34%.

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%.

VO’s CAGR is 12.54 percentage points higher than that of VTIP and as a result, would have yielded $9,633 more on a $10,000 investment. Thus, VO outperformed VTIP by 12.54% annually.


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