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VTIP vs. TQQQ: What’s The Difference?

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. VTIP is a Vanguard Inflation-Protected Bond fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between VTIP and TQQQ? And which fund is better?

The expense ratio of VTIP is 0.90 percentage points lower than TQQQ’s (0.05% vs. 0.95%). VTIP is mostly comprised of AAA bonds while TQQQ has a high exposure to the technology sector. Overall, VTIP has provided lower returns than TQQQ over the past 7 years.

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

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Summary

VTIPTQQQ
NameVanguard Short-Term Inflation-Protected Securities Index Fund ETF SharesProShares UltraPro QQQ
CategoryInflation-Protected BondTrading–Leveraged Equity
IssuerVanguardProShares
AUM50.67B12.41B
Avg. Return1.79%61.22%
Div. Yield1.35%0.0%
Expense Ratio0.05%0.95%

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 ProShares UltraPro QQQ (TQQQ) is a Trading–Leveraged Equity fund that is issued by ProShares. It currently has 12.41B total assets under management and has yielded an average annual return of 61.22% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.95%.

VTIP’s dividend yield is 1.35% higher than that of TQQQ (1.35% vs. 0.0%). Also, VTIP yielded on average 59.43% less per year over the past decade (1.79% vs. 61.22%). The expense ratio of VTIP is 0.90 percentage points lower than TQQQ’s (0.05% vs. 0.95%).

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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.

TQQQ - Holdings

TQQQ HoldingsWeight
Nasdaq 100 Index Swap Goldman Sachs International45.11%
Nasdaq 100 Index Swap Societe Generale44.73%
Nasdaq 100 Index Swap Bnp Paribas38.05%
Nasdaq 100 Index Swap Bank Of America Na31.53%
Nasdaq 100 Index Swap Citibank Na31.49%
Nasdaq 100 Index Swap Jp Morgan Securities26.2%
Apple Inc7.49%
Microsoft Corp6.69%
Nasdaq 100 Index Swap Credit Suisse International5.9%
Amazon.com Inc5.68%

TQQQ’s Top Holdings are Nasdaq 100 Index Swap Goldman Sachs International, Nasdaq 100 Index Swap Societe Generale, Nasdaq 100 Index Swap Bnp Paribas, Nasdaq 100 Index Swap Bank Of America Na, and Nasdaq 100 Index Swap Citibank Na at 45.11%, 44.73%, 38.05%, 31.53%, and 31.49%.

Nasdaq 100 Index Swap Jp Morgan Securities (26.2%), Apple Inc (7.49%), and Microsoft Corp (6.69%) have a slightly smaller but still significant weight. Nasdaq 100 Index Swap Credit Suisse International and Amazon.com Inc are also represented in the TQQQ’s holdings at 5.9% and 5.68%.

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Risk Analysis

VTIPTQQQ
Mean Return04.65
R-squared083.64
Std. Deviation050.08
Alpha07.29
Beta03.37
Sharpe Ratio01.1
Treynor Ratio015.65

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

The ProShares UltraPro QQQ (TQQQ) has a Treynor Ratio of 15.65 with a Alpha of 7.29 and a Sharpe Ratio of 1.1. Its Mean Return is 4.65 while TQQQ’s Beta is 3.37. Furthermore, the fund has a R-squared of 83.64 and a Standard Deviation of 50.08.

VTIP’s Mean Return is 4.65 points lower than that of TQQQ and its R-squared is 83.64 points lower. With a Standard Deviation of 0, VTIP is slightly less volatile than TQQQ. The Alpha and Beta of VTIP are 7.29 points lower and 3.37 points lower than TQQQ’s Alpha and Beta.

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Performance

Annual Returns

VTIP vs. TQQQ - Annual Returns

YearVTIPTQQQ
20204.97%109.85%
20194.83%133.93%
20180.54%-19.65%
20170.82%118.65%
20162.71%11.04%
2015-0.15%17.41%
2014-1.17%56.82%
2013-1.55%139.98%
20120.0%51.95%
20110.0%-7.77%
20100.0%0.0%

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 TQQQ, returning 139.98% on an annual basis. The poorest year for TQQQ in the last ten years was 2018, with a yield of -19.65%. Most years the ProShares UltraPro QQQ has given investors modest returns, such as in 2015, 2012, and 2014, when gains were 17.41%, 51.95%, and 56.82% respectively.

Portfolio Growth

VTIP vs. TQQQ - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VTIP$10,000$11,3051.79%
TQQQ$10,000$176,32561.22%

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 TQQQ, the end total would have been $176,325. This equates to a $166,325 profit over 7 years and a compound annual growth rate (CAGR) of 61.22%.

VTIP’s CAGR is 59.43 percentage points lower than that of TQQQ and as a result, would have yielded $165,020 less on a $10,000 investment. Thus, VTIP performed worse than TQQQ by 59.43% annually.


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