VTIP vs. IWN: What’s The Difference?

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) and the iShares Russell 2000 Value ETF (IWN) are both among the Top 100 ETFs. VTIP is a Vanguard Inflation-Protected Bond fund and IWN is a iShares Small Value fund. So, what’s the difference between VTIP and IWN? And which fund is better?

The expense ratio of VTIP is 0.19 percentage points lower than IWN’s (0.05% vs. 0.24%). VTIP is mostly comprised of AAA bonds while IWN has a high exposure to the financial services sector. Overall, VTIP has provided lower returns than IWN over the past 7 years.

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

Summary

VTIP IWN
Name Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares iShares Russell 2000 Value ETF
Category Inflation-Protected Bond Small Value
Issuer Vanguard iShares
AUM 50.67B 15.48B
Avg. Return 1.79% 10.96%
Div. Yield 1.35% 1.26%
Expense Ratio 0.05% 0.24%

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 Russell 2000 Value ETF (IWN) is a Small Value fund that is issued by iShares. It currently has 15.48B total assets under management and has yielded an average annual return of 10.96% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.24%.

VTIP’s dividend yield is 0.09% higher than that of IWN (1.35% vs. 1.26%). Also, VTIP yielded on average 9.17% less per year over the past decade (1.79% vs. 10.96%). The expense ratio of VTIP is 0.19 percentage points lower than IWN’s (0.05% vs. 0.24%).

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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.

IWN - Holdings

IWN Holdings Weight
AMC Entertainment Holdings Inc Class A 1.06%
Tenet Healthcare Corp 0.47%
Stag Industrial Inc 0.47%
Ovintiv Inc 0.45%
EMCOR Group Inc 0.42%
Valley National Bancorp 0.37%
Chesapeake Energy Corp Ordinary Shares – New 0.37%
Agree Realty Corp 0.36%
Macy’s Inc 0.35%
Essent Group Ltd 0.35%

IWN’s Top Holdings are AMC Entertainment Holdings Inc Class A, Tenet Healthcare Corp, Stag Industrial Inc, Ovintiv Inc, and EMCOR Group Inc at 1.06%, 0.47%, 0.47%, 0.45%, and 0.42%.

Valley National Bancorp (0.37%), Chesapeake Energy Corp Ordinary Shares – New (0.37%), and Agree Realty Corp (0.36%) have a slightly smaller but still significant weight. Macy’s Inc and Essent Group Ltd are also represented in the IWN’s holdings at 0.35% and 0.35%.

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Risk Analysis

VTIP IWN
Mean Return 0 1.01
R-squared 0 72.64
Std. Deviation 0 19.28
Alpha 0 -6.32
Beta 0 1.21
Sharpe Ratio 0 0.59
Treynor Ratio 0 8.3

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

The iShares Russell 2000 Value ETF (IWN) has a Alpha of -6.32 with a R-squared of 72.64 and a Sharpe Ratio of 0.59. Its Mean Return is 1.01 while IWN’s Beta is 1.21. Furthermore, the fund has a Standard Deviation of 19.28 and a Treynor Ratio of 8.3.

VTIP’s Mean Return is 1.01 points lower than that of IWN and its R-squared is 72.64 points lower. With a Standard Deviation of 0, VTIP is slightly less volatile than IWN. The Alpha and Beta of VTIP are 6.32 points higher and 1.21 points lower than IWN’s Alpha and Beta.

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Performance

Annual Returns

VTIP vs. IWN - Annual Returns

Year VTIP IWN
2020 4.97% 4.5%
2019 4.83% 22.17%
2018 0.54% -12.94%
2017 0.82% 7.73%
2016 2.71% 31.64%
2015 -0.15% -7.53%
2014 -1.17% 4.13%
2013 -1.55% 34.3%
2012 0.0% 17.92%
2011 0.0% -5.64%
2010 0.0% 24.29%

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 IWN, returning 34.3% on an annual basis. The poorest year for IWN in the last ten years was 2018, with a yield of -12.94%. Most years the iShares Russell 2000 Value ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 4.5%, 7.73%, and 17.92% respectively.

Portfolio Growth

VTIP vs. IWN - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VTIP $10,000 $11,305 1.79%
IWN $10,000 $15,177 10.96%

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 IWN, the end total would have been $15,177. This equates to a $5,177 profit over 7 years and a compound annual growth rate (CAGR) of 10.96%.

VTIP’s CAGR is 9.17 percentage points lower than that of IWN and as a result, would have yielded $3,872 less on a $10,000 investment. Thus, VTIP performed worse than IWN by 9.17% annually.


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