VTV vs. TIP: What’s The Difference?

The Vanguard Value Index Fund ETF Shares (VTV) and the iShares TIPS Bond ETF (TIP) are both among the Top 100 ETFs. VTV is a Vanguard Large Value fund and TIP is a iShares Inflation-Protected Bond fund. So, what’s the difference between VTV and TIP? And which fund is better?

The expense ratio of VTV is 0.15 percentage points lower than TIP’s (0.04% vs. 0.19%). VTV also has a high exposure to the financial services sector while TIP is mostly comprised of AAA bonds. Overall, VTV has provided higher returns than TIP over the past ten years.

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

Summary

VTV TIP
Name Vanguard Value Index Fund ETF Shares iShares TIPS Bond ETF
Category Large Value Inflation-Protected Bond
Issuer Vanguard iShares
AUM 125.77B 28.3B
Avg. Return 12.07% 4.07%
Div. Yield 2.15% 1.87%
Expense Ratio 0.04% 0.19%

The Vanguard Value Index Fund ETF Shares (VTV) is a Large Value fund that is issued by Vanguard. It currently has 125.77B total assets under management and has yielded an average annual return of 12.07% over the past 10 years. The fund has a dividend yield of 2.15% with an expense ratio of 0.04%.

The iShares TIPS Bond ETF (TIP) is a Inflation-Protected Bond fund that is issued by iShares. It currently has 28.3B total assets under management and has yielded an average annual return of 4.07% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.19%.

VTV’s dividend yield is 0.28% higher than that of TIP (2.15% vs. 1.87%). Also, VTV yielded on average 8.00% more per year over the past decade (12.07% vs. 4.07%). The expense ratio of VTV is 0.15 percentage points lower than TIP’s (0.04% vs. 0.19%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Holdings

VTV - Holdings

VTV Holdings Weight
Berkshire Hathaway Inc Class B 2.98%
JPMorgan Chase & Co 2.82%
Johnson & Johnson 2.6%
UnitedHealth Group Inc 2.27%
Procter & Gamble Co 1.98%
Bank of America Corp 1.91%
Exxon Mobil Corp 1.6%
Comcast Corp Class A 1.57%
Intel Corp 1.36%
Verizon Communications Inc 1.32%

VTV’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.98%, 2.82%, 2.6%, 2.27%, and 1.98%.

Bank of America Corp (1.91%), Exxon Mobil Corp (1.6%), and Comcast Corp Class A (1.57%) have a slightly smaller but still significant weight. Intel Corp and Verizon Communications Inc are also represented in the VTV’s holdings at 1.36% and 1.32%.

TIP - Holdings

TIP Bond Sectors Weight
AAA 99.31%
Others 0.69%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

TIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.31%, 0.69%, 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.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

VTV TIP
Mean Return 1.05 0.28
R-squared 92.61 66.57
Std. Deviation 13.78 4.33
Alpha -1.92 -0.58
Beta 0.98 1.18
Sharpe Ratio 0.87 0.62
Treynor Ratio 11.94 2.24

The Vanguard Value Index Fund ETF Shares (VTV) has a Alpha of -1.92 with a Treynor Ratio of 11.94 and a R-squared of 92.61. Its Beta is 0.98 while VTV’s Standard Deviation is 13.78. Furthermore, the fund has a Sharpe Ratio of 0.87 and a Mean Return of 1.05.

The iShares TIPS Bond ETF (TIP) has a Mean Return of 0.28 with a Beta of 1.18 and a Treynor Ratio of 2.24. Its Alpha is -0.58 while TIP’s R-squared is 66.57. Furthermore, the fund has a Sharpe Ratio of 0.62 and a Standard Deviation of 4.33.

VTV’s Mean Return is 0.77 points higher than that of TIP and its R-squared is 26.04 points higher. With a Standard Deviation of 13.78, VTV is slightly more volatile than TIP. The Alpha and Beta of VTV are 1.34 points lower and 0.20 points lower than TIP’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Gemini - the simplest and cheapest broker I've found! Click here to read more (link to Gemini).

Performance

Annual Returns

VTV vs. TIP - Annual Returns

Year VTV TIP
2020 2.23% 10.91%
2019 25.85% 8.28%
2018 -5.39% -1.43%
2017 17.12% 2.92%
2016 16.88% 4.56%
2015 -0.89% -1.59%
2014 13.19% 3.49%
2013 33.03% -8.65%
2012 15.19% 6.8%
2011 1.16% 13.4%
2010 14.45% 6.1%

VTV had its best year in 2013 with an annual return of 33.03%. VTV’s worst year over the past decade yielded -5.39% and occurred in 2018. In most years the Vanguard Value Index Fund ETF Shares provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.19%, 14.45%, and 15.19% respectively.

The year 2011 was the strongest year for TIP, returning 13.4% on an annual basis. The poorest year for TIP in the last ten years was 2013, with a yield of -8.65%. Most years the iShares TIPS Bond ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were 3.49%, 4.56%, and 6.1% respectively.

Portfolio Growth

VTV vs. TIP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VTV $10,000 $33,163 12.07%
TIP $10,000 $15,229 4.07%

A $10,000 investment in VTV would have resulted in a final balance of $33,163. This is a profit of $23,163 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.07%.

With a $10,000 investment in TIP, the end total would have been $15,229. This equates to a $5,229 profit over 11 years and a compound annual growth rate (CAGR) of 4.07%.

VTV’s CAGR is 8.00 percentage points higher than that of TIP and as a result, would have yielded $17,934 more on a $10,000 investment. Thus, VTV outperformed TIP by 8.00% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply