The Vanguard Total International Stock Index Fund ETF Shares (VXUS) and the iShares TIPS Bond ETF (TIP) are both among the Top 100 ETFs. VXUS is a Vanguard Foreign Large Blend fund and TIP is a iShares Inflation-Protected Bond fund. So, what’s the difference between VXUS and TIP? And which fund is better?
The expense ratio of VXUS is 0.11 percentage points lower than TIP’s (0.08% vs. 0.19%). VXUS also has a high exposure to the financial services sector while TIP is mostly comprised of AAA bonds. Overall, VXUS has provided higher returns than TIP over the past ten years.
In this article, we’ll compare VXUS vs. TIP. We’ll look at industry exposure and annual returns, as well as at their holdings and risk metrics. Moreover, I’ll also discuss VXUS’s and TIP’s performance, portfolio growth, and fund composition and examine how these affect their overall returns.
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Summary
| VXUS | TIP | |
| NameVanguard Total International Stock Index Fund ETF SharesiShares TIPS Bond ETF | ||
| Category | Foreign Large Blend | Inflation-Protected Bond |
| Issuer | Vanguard | iShares |
| AUM | 404.73B | 28.3B |
| Avg. Return | 8.41% | 4.07% |
| Div. Yield | 2.44% | 1.87% |
| Expense Ratio | 0.08% | 0.19% |
The Vanguard Total International Stock Index Fund ETF Shares (VXUS) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 404.73B total assets under management and has yielded an average annual return of 8.41% over the past 10 years. The fund has a dividend yield of 2.44% with an expense ratio of 0.08%.
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%.
VXUS’s dividend yield is 0.57% higher than that of TIP (2.44% vs. 1.87%). Also, VXUS yielded on average 4.33% more per year over the past decade (8.41% vs. 4.07%). The expense ratio of VXUS is 0.11 percentage points lower than TIP’s (0.08% vs. 0.19%).
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Fund Composition
Holdings
| VXUS Holdings | Weight |
| Taiwan Semiconductor Manufacturing Co Ltd | 1.62% |
| Tencent Holdings Ltd | 1.41% |
| Alibaba Group Holding Ltd Ordinary Shares | 1.26% |
| Nestle SA | 1.1% |
| Samsung Electronics Co Ltd | 1.05% |
| ASML Holding NV | 0.86% |
| Roche Holding AG | 0.81% |
| Toyota Motor Corp | 0.67% |
| LVMH Moet Hennessy Louis Vuitton SE | 0.61% |
| Novartis AG | 0.6% |
VXUS’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, and Samsung Electronics Co Ltd at 1.62%, 1.41%, 1.26%, 1.1%, and 1.05%.
ASML Holding NV (0.86%), Roche Holding AG (0.81%), and Toyota Motor Corp (0.67%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VXUS’s holdings at 0.61% and 0.6%.
| 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.
Risk Analysis
| VXUS | TIP | |
| Mean Return | 0.56 | 0.28 |
| R-squared | 98.39 | 66.57 |
| Std. Deviation | 15.12 | 4.33 |
| Alpha | 0.31 | -0.58 |
| Beta | 0.99 | 1.18 |
| Sharpe Ratio | 0.4 | 0.62 |
| Treynor Ratio | 5.14 | 2.24 |
The Vanguard Total International Stock Index Fund ETF Shares (VXUS) has a Mean Return of 0.56 with a Sharpe Ratio of 0.4 and a Treynor Ratio of 5.14. Its Beta is 0.99 while VXUS’s R-squared is 98.39. Furthermore, the fund has a Standard Deviation of 15.12 and a Alpha of 0.31.
The iShares TIPS Bond ETF (TIP) has a Mean Return of 0.28 with a R-squared of 66.57 and a Alpha of -0.58. Its Standard Deviation is 4.33 while TIP’s Sharpe Ratio is 0.62. Furthermore, the fund has a Beta of 1.18 and a Treynor Ratio of 2.24.
VXUS’s Mean Return is 0.28 points higher than that of TIP and its R-squared is 31.82 points higher. With a Standard Deviation of 15.12, VXUS is slightly more volatile than TIP. The Alpha and Beta of VXUS are 0.89 points higher and 0.19 points lower than TIP’s Alpha and Beta.
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Performance
Annual Returns
| Year | VXUS | TIP |
| 2020 | 11.32% | 10.91% |
| 2019 | 21.58% | 8.28% |
| 2018 | -14.42% | -1.43% |
| 2017 | 27.52% | 2.92% |
| 2016 | 4.72% | 4.56% |
| 2015 | -4.28% | -1.59% |
| 2014 | -4.17% | 3.49% |
| 2013 | 15.16% | -8.65% |
| 2012 | 18.22% | 6.8% |
| 2011 | 0.0% | 13.4% |
| 2010 | 0.0% | 6.1% |
VXUS had its best year in 2017 with an annual return of 27.52%. VXUS’s worst year over the past decade yielded -14.42% and occurred in 2018. In most years the Vanguard Total International Stock Index Fund ETF Shares provided moderate returns such as in 2010, 2016, and 2020 where annual returns amounted to 0.0%, 4.72%, and 11.32% 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
| Fund | Initial Balance | Final Balance | CAGR |
| VXUS | $10,000 | $19,315 | 8.41% |
| TIP | $10,000 | $12,657 | 4.07% |
A $10,000 investment in VXUS would have resulted in a final balance of $19,315. This is a profit of $9,315 over 9 years and amounts to a compound annual growth rate (CAGR) of 8.41%.
With a $10,000 investment in TIP, the end total would have been $12,657. This equates to a $2,657 profit over 9 years and a compound annual growth rate (CAGR) of 4.07%.
VXUS’s CAGR is 4.33 percentage points higher than that of TIP and as a result, would have yielded $6,658 more on a $10,000 investment. Thus, VXUS outperformed TIP by 4.33% annually.
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