TIP vs VTIP

TIPBiShares TIPS Bond ETF

VTIPAVanguard Short-Term Inflation-Protected Securities ETF

In short

TIP The 2003-vintage TIPS fund: roughly 50 inflation-linked Treasuries, tracked tightly and traded heavily. You pay up for that depth, because cheaper TIPS wrappers now exist.

VTIP Inflation protection without the long-bond whiplash. VTIP holds only Treasury TIPS maturing inside five years, so CPI does most of the driving and rate swings do less of it, for three basis points a year.

Stated mandate

TIP The fund seeks to track an index of inflation-protected U.S. Treasury bonds, providing fixed-income exposure and a potential hedge against inflation.

VTIP Tracks a benchmark measuring the investment return of U.S. Treasury inflation-protected public obligations with remaining maturities under five years.

Why people hold it

• TIP Owns the inflation-linked Treasury market straight: about 50 TIPS, where the hedge is built into the bonds themselves rather than layered on with derivatives.ishares.com
• A multi-billion-dollar fund that trades actively and stays very close to its benchmark, the ICE U.S. Treasury Inflation Linked Bond Index.
• Trading since 2003, one of the longest-tenured inflation-linked bond funds on the market, with a large iShares fixed-income operation behind it.

• VTIP Three basis points a year, against a 0.12% median for Treasury bond ETFs in its group. Vanguard's at-cost setup shows up right in the fee line.vanguard.com
• TIPS principal ratchets with CPI, and the under-five-year maturity cap keeps duration short, so rate moves land lighter here than in full-curve TIPS funds like SCHP.vanguard.com
• Open since 2012 and now a multi-billion-dollar, actively traded fund that owns Treasury paper directly. Plain index rules, no swaps, no credit detours.

Worth knowing

• TIP At 0.18% a year it runs above the median Treasury fund in its group, and SCHP covers similar TIPS ground for 0.03%.
• Inflation protection is not price protection. The index spans the full TIPS curve, including long maturities, so rising real yields drag on the share price.ishares.com
• Payouts arrive on an irregular schedule and move with inflation accruals, so income here behaves less like a steady coupon than a nominal bond fund's.

• VTIP Short maturities cut both ways: less sensitivity to rates, and less exposure to shifts in long-run inflation expectations than a full-maturity TIPS fund such as SCHP.
• Income rides on CPI accruals, so the quarterly payout moves around rather than arriving as a steady coupon.
• This is one narrow slice of one market, short US Treasury TIPS, not a diversified bond portfolio.

Full TIP profile⁠

Full VTIP profile⁠