VTIP vs. ACWI: What’s The Difference?

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) and the iShares MSCI ACWI ETF (ACWI) are both among the Top 100 ETFs. VTIP is a Vanguard Inflation-Protected Bond fund and ACWI is a iShares N/A fund. So, what’s the difference between VTIP and ACWI? And which fund is better?

The expense ratio of VTIP is 0.27 percentage points lower than ACWI’s (0.05% vs. 0.32%). VTIP is mostly comprised of AAA bonds while ACWI has a high exposure to the technology sector. Overall, VTIP has provided lower returns than ACWI over the past 7 years.

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

Summary

VTIP ACWI
Name Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares iShares MSCI ACWI ETF
Category Inflation-Protected Bond N/A
Issuer Vanguard iShares
AUM 50.67B 16.85B
Avg. Return 1.79% 10.21%
Div. Yield 1.35% 1.39%
Expense Ratio 0.05% 0.32%

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%.

The iShares MSCI ACWI ETF (ACWI) is a N/A fund that is issued by iShares. It currently has 16.85B total assets under management and has yielded an average annual return of 10.21% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.32%.

VTIP’s dividend yield is 0.04% lower than that of ACWI (1.35% vs. 1.39%). Also, VTIP yielded on average 8.42% less per year over the past decade (1.79% vs. 10.21%). The expense ratio of VTIP is 0.27 percentage points lower than ACWI’s (0.05% vs. 0.32%).

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Fund Composition

Holdings

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.

ACWI - Holdings

ACWI Holdings Weight
Apple Inc 3.44%
Microsoft Corp 2.91%
Amazon.com Inc 2.21%
Facebook Inc A 1.25%
Alphabet Inc Class C 1.12%
Alphabet Inc A 1.09%
Taiwan Semiconductor Manufacturing Co Ltd 0.79%
Tesla Inc 0.78%
NVIDIA Corp 0.74%
JPMorgan Chase & Co 0.71%

ACWI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc Class C at 3.44%, 2.91%, 2.21%, 1.25%, and 1.12%.

Alphabet Inc A (1.09%), Taiwan Semiconductor Manufacturing Co Ltd (0.79%), and Tesla Inc (0.78%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ACWI’s holdings at 0.74% and 0.71%.

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Risk Analysis

VTIP ACWI
Mean Return 0 0.89
R-squared 0 99.96
Std. Deviation 0 14.05
Alpha 0 0.15
Beta 0 1
Sharpe Ratio 0 0.71
Treynor Ratio 0 9.45

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

The iShares MSCI ACWI ETF (ACWI) has a Treynor Ratio of 9.45 with a Standard Deviation of 14.05 and a R-squared of 99.96. Its Sharpe Ratio is 0.71 while ACWI’s Alpha is 0.15. Furthermore, the fund has a Beta of 1 and a Mean Return of 0.89.

VTIP’s Mean Return is 0.89 points lower than that of ACWI and its R-squared is 99.96 points lower. With a Standard Deviation of 0, VTIP is slightly less volatile than ACWI. The Alpha and Beta of VTIP are 0.15 points lower and 1.00 points lower than ACWI’s Alpha and Beta.

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Performance

Annual Returns

VTIP vs. ACWI - Annual Returns

Year VTIP ACWI
2020 4.97% 16.38%
2019 4.83% 26.7%
2018 0.54% -9.15%
2017 0.82% 24.35%
2016 2.71% 8.22%
2015 -0.15% -2.39%
2014 -1.17% 4.64%
2013 -1.55% 22.91%
2012 0.0% 15.99%
2011 0.0% -7.6%
2010 0.0% 12.31%

VTIP had its best year in 2020 with an annual return of 4.97%. VTIP’s worst year over the past decade yielded -1.55% and occurred in 2013. In most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares provided moderate returns such as in 2011, 2010, and 2018 where annual returns amounted to 0.0%, 0.0%, and 0.54% respectively.

The year 2019 was the strongest year for ACWI, returning 26.7% on an annual basis. The poorest year for ACWI in the last ten years was 2018, with a yield of -9.15%. Most years the iShares MSCI ACWI ETF has given investors modest returns, such as in 2016, 2010, and 2012, when gains were 8.22%, 12.31%, and 15.99% respectively.

Portfolio Growth

VTIP vs. ACWI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VTIP $10,000 $11,305 1.79%
ACWI $10,000 $18,413 10.21%

A $10,000 investment in VTIP would have resulted in a final balance of $11,305. This is a profit of $1,305 over 7 years and amounts to a compound annual growth rate (CAGR) of 1.79%.

With a $10,000 investment in ACWI, the end total would have been $18,413. This equates to a $8,413 profit over 7 years and a compound annual growth rate (CAGR) of 10.21%.

VTIP’s CAGR is 8.42 percentage points lower than that of ACWI and as a result, would have yielded $7,108 less on a $10,000 investment. Thus, VTIP performed worse than ACWI by 8.42% annually.


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