VOO vs. TIP: What’s The Difference?

The Vanguard S&P 500 ETF (VOO) and the iShares TIPS Bond ETF (TIP) are both among the Top 100 ETFs. VOO is a Vanguard Large Blend fund and TIP is a iShares Inflation-Protected Bond fund. So, what’s the difference between VOO and TIP? And which fund is better?

The expense ratio of VOO is 0.16 percentage points lower than TIP’s (0.03% vs. 0.19%). VOO also has a high exposure to the technology sector while TIP is mostly comprised of AAA bonds. Overall, VOO has provided higher returns than TIP over the past ten years.

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

Summary

VOO TIP
Name Vanguard S&P 500 ETF iShares TIPS Bond ETF
Category Large Blend Inflation-Protected Bond
Issuer Vanguard iShares
AUM 753.41B 28.3B
Avg. Return 14.45% 4.07%
Div. Yield 1.34% 1.87%
Expense Ratio 0.03% 0.19%

The Vanguard S&P 500 ETF (VOO) is a Large Blend fund that is issued by Vanguard. It currently has 753.41B total assets under management and has yielded an average annual return of 14.45% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.03%.

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%.

VOO’s dividend yield is 0.53% lower than that of TIP (1.34% vs. 1.87%). Also, VOO yielded on average 10.38% more per year over the past decade (14.45% vs. 4.07%). The expense ratio of VOO is 0.16 percentage points lower than TIP’s (0.03% vs. 0.19%).

Fund Composition

Holdings

VOO - Holdings

VOO Holdings Weight
Apple Inc 5.92%
Microsoft Corp 5.62%
Amazon.com Inc 4.06%
Facebook Inc Class A 2.29%
Alphabet Inc Class A 2.02%
Alphabet Inc Class C 1.97%
Tesla Inc 1.44%
Berkshire Hathaway Inc Class B 1.44%
NVIDIA Corp 1.37%
JPMorgan Chase & Co 1.3%

VOO’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.92%, 5.62%, 4.06%, 2.29%, and 2.02%.

Alphabet Inc Class C (1.97%), Tesla Inc (1.44%), and Berkshire Hathaway Inc Class B (1.44%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VOO’s holdings at 1.37% and 1.3%.

TIP - Holdings

TIP Bond Sectors Weight
AAA 99.31%
Others 0.69%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

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.

Performance

Annual Returns

VOO vs. TIP - Annual Returns

Year VOO TIP
2020 18.35% 10.91%
2019 31.46% 8.28%
2018 -4.42% -1.43%
2017 21.78% 2.92%
2016 11.93% 4.56%
2015 1.35% -1.59%
2014 13.63% 3.49%
2013 32.33% -8.65%
2012 15.98% 6.8%
2011 2.09% 13.4%
2010 0.0% 6.1%

VOO had its best year in 2013 with an annual return of 32.33%. VOO’s worst year over the past decade yielded -4.42% and occurred in 2018. In most years the Vanguard S&P 500 ETF provided moderate returns such as in 2016, 2014, and 2012 where annual returns amounted to 11.93%, 13.63%, and 15.98% 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.

Portfolio Growth

VOO vs. TIP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VOO $10,000 $36,575 14.45%
TIP $10,000 $14,353 4.07%

A $10,000 investment in VOO would have resulted in a final balance of $36,575. This is a profit of $26,575 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.45%.

With a $10,000 investment in TIP, the end total would have been $14,353. This equates to a $4,353 profit over 10 years and a compound annual growth rate (CAGR) of 4.07%.

VOO’s CAGR is 10.38 percentage points higher than that of TIP and as a result, would have yielded $22,222 more on a $10,000 investment. Thus, VOO outperformed TIP by 10.38% annually.


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