TIPS ETFS – Intermediate Duration Comparison

dollar bill with the word Treasury on it

Treasury Inflation Protected Securities, or TIPS for short, are used to protect investors against unexpected inflation. The typical TIPS bond yield is made up of two portions:

1) A fixed rate plus another

2)A portion that’s determined by the current inflation rate.

The fixed rate portion is currently above 1.5% on TIPS, this has led some investors into pursuing TIPS for the first time in over a decade. Previously the yields were negative. That’s right, NEGATIVE!

One major disadvantage of TIPS is they are only sold a few times a year if you buy from the Treasury Direct website. One would have to purchase on the secondary market (at your broker) to build a ladder of TIPS bonds quickly. This is possibly more work than it’s worth to many investors. This is where a BOND FUND comes in handy. Bond funds are a way to essentially get a bond ladder without spending lots of time building one. Today we are going to compare four different intermediate maturity TIPS ETF’s. These are the TIPS Exchange Traded Fund offerings:

  • Schwab- SCHP
  • Blackrock- TIP
  • State Street- SPIP
  • Goldman Saachs- GTIP


Before I get into the funds, a few things you need to keep in mind when it comes to bonds:

1)Matching Maturity dates to liability is important. In other words, if you are expecting to need the money in five years, then don’t buy a 15 year TIPS bond or fund. In my case, I’m looking at a liability range of 5-7 years.

2)Interest Rates and Market Price are inversely related. Some buyers of TIPS funds got angry this year because we had high inflation, yet the market value of their TIPS funds crashed double digits. These people bought something they didn’t understand; the bond fund did exactly as it was intended to do. As inflation rises, that amount gets tacked onto the YIELD. As the yield increases, the market price decreases.

3)Duration is a measure of interest rate sensitivity. The higher the Duration, the more sensitive it is to interest rates.

You want to look at these bond funds, not as vehicles of capital appreciation, but as income generators, where the YIELD is what you want to pay attention to. The TIPS funds I’m comparing today all pay over a 7% yield. If you hold the fund to your chosen liability date, you should come out okay.

Here are some important stats for the INTERMEDIATE TIPS E.T.F.s

Expense Ratio.
Average Spread %.
Assets Under Management24.53B14.1B2.35B137M
Trading at a Discount?NOYESYESYES
AS of 11/24/2022

Comments & Composition of TIPS ETF’s

From this data, you can see that the duration is highest for SPIP. Therefore, it will be the most sensitive to interest rates. SCHP will be the least sensitive to interest rate changes. Schwab’s SCHP has the lowest expense ratio. SPIP has the highest yield, not surprising with the higher duration.

Current YTD performance-All of these ETF’s are down in price by around 11-12% for the year. As stated earlier, as the yields increased, the price went down. However, if you take the 7+% yield into account, you are only down around 4-5% from a TOTAL RETURN perspective.

Let’s look at the individual bond make up of these ETF’s. This chart shows you what percentage of the fund is allocated to each year set. Remember-if your goal is 5-7 year liability, then you’ll want an ETF that gets closest to this.

great than 207.91%11.11%10.92%12.10%
Composition of Exchange Traded Funds

Comments on Bond Fund’s Composition.

GTIPS has more in the 1 to 3 year area than the other funds. Oddly enough, it also has more in the far end of the curve at 15 to 20 years. For me, there is too much in the 15-20 year mark for my needs. This would be good for someone wanting the funds at a later point in time.

TIP has 35% of it’s bonds in the 5 to 10 year mark. In addition, SCHP has 36% within this same maturity length. Once again, SPIP has more in the 15 to 20 year mark.

Given my own personal situation, I’m looking at TIP or SCHP. Both of these funds have a high level of Assets Under Management, so we should feel pretty safe purchasing either. However, once I consider the lower expense ratio and the fact it trades at a discount, SCHP comes out ahead by a few inches. This will be the TIPS fund I purchase for my own retirement account. Please understand, your situation may not be the same as mine and nothing here constitutes financial advice. I urge you to look into the data of each fund in order to make your own decisions.


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