VTIP vs. IWS: What’s The Difference?

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

The expense ratio of VTIP is 0.18 percentage points lower than IWS’s (0.05% vs. 0.23%). VTIP is mostly comprised of AAA bonds while IWS has a high exposure to the financial services sector. Overall, VTIP has provided lower returns than IWS over the past 7 years.

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

Summary

VTIP IWS
Name Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares iShares Russell Mid-Cap Value ETF
Category Inflation-Protected Bond Mid-Cap Value
Issuer Vanguard iShares
AUM 50.67B 14.24B
Avg. Return 1.79% 12.35%
Div. Yield 1.35% 1.34%
Expense Ratio 0.05% 0.23%

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 Mid-Cap Value ETF (IWS) is a Mid-Cap Value fund that is issued by iShares. It currently has 14.24B total assets under management and has yielded an average annual return of 12.35% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.23%.

VTIP’s dividend yield is 0.01% higher than that of IWS (1.35% vs. 1.34%). Also, VTIP yielded on average 10.55% less per year over the past decade (1.79% vs. 12.35%). The expense ratio of VTIP is 0.18 percentage points lower than IWS’s (0.05% vs. 0.23%).

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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.

IWS - Holdings

IWS Holdings Weight
Twitter Inc 0.69%
Marvell Technology Inc 0.69%
IHS Markit Ltd 0.62%
Prudential Financial Inc 0.56%
Otis Worldwide Corp Ordinary Shares 0.54%
International Flavors & Fragrances Inc 0.53%
Xcel Energy Inc 0.52%
Motorola Solutions Inc 0.52%
Aptiv PLC 0.52%
Aflac Inc 0.52%

IWS’s Top Holdings are Twitter Inc, Marvell Technology Inc, IHS Markit Ltd, Prudential Financial Inc, and Otis Worldwide Corp Ordinary Shares at 0.69%, 0.69%, 0.62%, 0.56%, and 0.54%.

International Flavors & Fragrances Inc (0.53%), Xcel Energy Inc (0.52%), and Motorola Solutions Inc (0.52%) have a slightly smaller but still significant weight. Aptiv PLC and Aflac Inc are also represented in the IWS’s holdings at 0.52% and 0.52%.

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Risk Analysis

VTIP IWS
Mean Return 0 1.06
R-squared 0 87.04
Std. Deviation 0 16.03
Alpha 0 -4.11
Beta 0 1.1
Sharpe Ratio 0 0.75
Treynor Ratio 0 10.3

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

The iShares Russell Mid-Cap Value ETF (IWS) has a Sharpe Ratio of 0.75 with a Beta of 1.1 and a R-squared of 87.04. Its Alpha is -4.11 while IWS’s Treynor Ratio is 10.3. Furthermore, the fund has a Standard Deviation of 16.03 and a Mean Return of 1.06.

VTIP’s Mean Return is 1.06 points lower than that of IWS and its R-squared is 87.04 points lower. With a Standard Deviation of 0, VTIP is slightly less volatile than IWS. The Alpha and Beta of VTIP are 4.11 points higher and 1.10 points lower than IWS’s Alpha and Beta.

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Performance

Annual Returns

VTIP vs. IWS - Annual Returns

Year VTIP IWS
2020 4.97% 4.76%
2019 4.83% 26.78%
2018 0.54% -12.36%
2017 0.82% 13.1%
2016 2.71% 19.69%
2015 -0.15% -4.93%
2014 -1.17% 14.49%
2013 -1.55% 33.11%
2012 0.0% 18.27%
2011 0.0% -1.55%
2010 0.0% 24.46%

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 IWS, returning 33.11% on an annual basis. The poorest year for IWS in the last ten years was 2018, with a yield of -12.36%. Most years the iShares Russell Mid-Cap Value ETF has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 13.1%, 14.49%, and 18.27% respectively.

Portfolio Growth

VTIP vs. IWS - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VTIP $10,000 $11,305 1.79%
IWS $10,000 $17,150 12.35%

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 IWS, the end total would have been $17,150. This equates to a $7,150 profit over 7 years and a compound annual growth rate (CAGR) of 12.35%.

VTIP’s CAGR is 10.55 percentage points lower than that of IWS and as a result, would have yielded $5,845 less on a $10,000 investment. Thus, VTIP performed worse than IWS by 10.55% annually.


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