The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. VTIP is a Vanguard Inflation-Protected Bond fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between VTIP and DFAC? And which fund is better?

The expense ratio of VTIP is 0.14 percentage points lower than DFAC’s (0.05% vs. 0.19%). VTIP is mostly comprised of AAA bonds while DFAC has a high exposure to the technology sector. Overall, VTIP has provided lower returns than DFAC over the past 7 years.

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

Summary

VTIPDFAC
NameVanguard Short-Term Inflation-Protected Securities Index Fund ETF SharesDimensional U.S. Core Equity 2 ETF
CategoryInflation-Protected BondLarge Blend
IssuerVanguardDimensional Fund Advisors
AUM50.67B13.53B
Avg. Return1.79%13.93%
Div. Yield1.35%1.0%
Expense Ratio0.05%0.19%

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 Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.

VTIP’s dividend yield is 0.35% higher than that of DFAC (1.35% vs. 1.0%). Also, VTIP yielded on average 12.14% less per year over the past decade (1.79% vs. 13.93%). The expense ratio of VTIP is 0.14 percentage points lower than DFAC’s (0.05% vs. 0.19%).

Fund Composition

Holdings

VTIP - Holdings

VTIP Bond SectorsWeight
AAA99.87%
Others0.13%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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.

DFAC - Holdings

DFAC HoldingsWeight
Apple Inc4.7%
Microsoft Corp3.81%
Amazon.com Inc2.39%
Johnson & Johnson1.05%
Facebook Inc Class A1.05%
JPMorgan Chase & Co1.0%
Alphabet Inc Class C0.85%
Alphabet Inc Class A0.84%
Berkshire Hathaway Inc Class B0.75%
Visa Inc Class A0.74%

DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.

JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.

Risk Analysis

VTIPDFAC
Mean Return01.19
R-squared095.1
Std. Deviation015.55
Alpha0-2.75
Beta01.12
Sharpe Ratio00.88
Treynor Ratio011.85

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

The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Treynor Ratio of 11.85 with a Beta of 1.12 and a Mean Return of 1.19. Its Alpha is -2.75 while DFAC’s R-squared is 95.1. Furthermore, the fund has a Sharpe Ratio of 0.88 and a Standard Deviation of 15.55.

VTIP’s Mean Return is 1.19 points lower than that of DFAC and its R-squared is 95.10 points lower. With a Standard Deviation of 0, VTIP is slightly less volatile than DFAC. The Alpha and Beta of VTIP are 2.75 points higher and 1.12 points lower than DFAC’s Alpha and Beta.

Performance

Annual Returns

VTIP vs. DFAC - Annual Returns

YearVTIPDFAC
20204.97%15.8%
20194.83%29.54%
20180.54%-9.43%
20170.82%18.82%
20162.71%16.31%
2015-0.15%-2.53%
2014-1.17%9.56%
2013-1.55%37.55%
20120.0%17.93%
20110.0%-1.96%
20100.0%21.67%

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 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.

Portfolio Growth

VTIP vs. DFAC - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VTIP$10,000$11,3051.79%
DFAC$10,000$20,05013.93%

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 DFAC, the end total would have been $20,050. This equates to a $10,050 profit over 7 years and a compound annual growth rate (CAGR) of 13.93%.

VTIP’s CAGR is 12.14 percentage points lower than that of DFAC and as a result, would have yielded $8,745 less on a $10,000 investment. Thus, VTIP performed worse than DFAC by 12.14% annually.

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