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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.

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Summary

VTVTIP
NameVanguard Value Index Fund ETF SharesiShares TIPS Bond ETF
CategoryLarge ValueInflation-Protected Bond
IssuerVanguardiShares
AUM125.77B28.3B
Avg. Return12.07%4.07%
Div. Yield2.15%1.87%
Expense Ratio0.04%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%).

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Fund Composition

Holdings

VTV - Holdings

VTV HoldingsWeight
Berkshire Hathaway Inc Class B2.98%
JPMorgan Chase & Co2.82%
Johnson & Johnson2.6%
UnitedHealth Group Inc2.27%
Procter & Gamble Co1.98%
Bank of America Corp1.91%
Exxon Mobil Corp1.6%
Comcast Corp Class A1.57%
Intel Corp1.36%
Verizon Communications Inc1.32%

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 SectorsWeight
AAA99.31%
Others0.69%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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.

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Risk Analysis

VTVTIP
Mean Return1.050.28
R-squared92.6166.57
Std. Deviation13.784.33
Alpha-1.92-0.58
Beta0.981.18
Sharpe Ratio0.870.62
Treynor Ratio11.942.24

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.

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Performance

Annual Returns

VTV vs. TIP - Annual Returns

YearVTVTIP
20202.23%10.91%
201925.85%8.28%
2018-5.39%-1.43%
201717.12%2.92%
201616.88%4.56%
2015-0.89%-1.59%
201413.19%3.49%
201333.03%-8.65%
201215.19%6.8%
20111.16%13.4%
201014.45%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

FundInitial BalanceFinal BalanceCAGR
VTV$10,000$33,16312.07%
TIP$10,000$15,2294.07%

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.


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