Best Of TIPS ETFs: Expenses, Dividends, and Returns

ETF Database

As central banks around the world continue to plow money into the financial system, investors have been bracing for an eventual uptick in inflationary pressures. While reported inflation throughout the developed world has remained tame–most markets are well within their official “comfort zone”–anxiety over rising prices remains. When the global economy stabilizes and consumers become more able to bear price increases, many expect CPI to spike [see Black Swan Hyperinflation ETFdb Portfolio].

There are a number of different tools for combating inflation. Some swear by commodities, which logically tend to appreciate when inflation arrives. Others believe equities make for a good bet in inflationary environments. But perhaps the most common tool for “inflation-proofing” a portfolio are inflation-protected bonds, securities whose face value adjusts based on reported inflation metrics.

ETFs have become common vehicles for holding TIPS; the Inflation Protected Bonds ETFdb Category consists of more than a dozen exchange-traded products, including domestic and international funds, with aggregate assets of almost $30 billion [see a list of all ETFdb Categories].

The Pro member download from the Inflation Protected Bonds ETFdb Category page can be used to highlight the funds with the lowest expenses, highest dividend yields, and best historical performance [see a sample Excel download here; Pro members can download more than 60 ETFdb Category pages and 200 ETFdb Types pages with a free 7-day trial].

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TIPS ETFdb Category
Number of ETFs 13
ER Range 0.14% to 0.50%
Total Assets $28.3 billion
As of June 6, 2012
Cheapest TIPS ETFs

There is a relatively wide range of expenses for TIPS ETFs; some funds charge as little as 14 basis points while others (WIP) have expense ratios of up to 0.50% annually.

The cheapest TIPS ETF is the U.S. TIPS ETF (SCHP) at 0.14%, followed by the SPDR Barclays Capital TIPS ETF (IPE) at 0.18%.

[Use the free ETF Screener to filter ETFs by sector and region exposure, as well as expenses and volume]

Commission Free TIPS ETFs

There are three ETFs in the TIPS ETFdb Category that are eligible for commission free trading, including:

Most Heavily Traded TIPS ETF

On an average day, the ETFs in the TIPS ETFdb Category trade more than 1.7 million shares. The most heavily traded ETF in this category is the Barclays TIPS Bond Fund (TIP) , which has an average daily volume of about one million shares.

Realtime Ratings: TIPS ETFs
Metric Top ETF Rating
Liquidity  Barclays TIPS Bond Fund (TIP) A+
Expenses  U.S. TIPS ETF (SCHP) A+
Performance  15+ Year U.S. TIPS Index Fund (LTPZ) A+
Volatility  Barclays 0-5 Year TIPS Bond Fund (STIP) A+
Dividend  SPDR DB International Government Inflation-Protected Bond ETF (WIP) A+
Concentration  International Inflation-Linked Bond Fund ETF (ITIP) A+

[Get access to Realtime Ratings for 1,400+ ETFs with a free 7-day trial to ETFdb Pro]

Best Performing TIPS ETFs

Though TIPS are generally through of as a very safe asset class that exhibits low risk and low return, some of these funds have delivered huge gains recently. As of June 6, 2012, the best performing TIPS ETFs are as follows:

Best Performers
1 Year 15+ Year U.S. TIPS Index Fund (LTPZ) +27.84%
3 Years SPDR Barclays Capital TIPS ETF (IPE) +33.49%
5 Years SPDR Barclays Capital TIPS ETF (IPE) +49.54%
As of 6/6/2012
Highest Yielding TIPS ETFs

TIPS ETFs aren’t generally known for high dividend payouts–the low risk involved generally translates into lower yields–but some products in this ETFdb Category have meaningful dividend yields (as of June 6, 2012):

Most Balanced TIPS ETFs

When comparing potential ETF investments, it is important to evaluate how deep and balanced the underlying portfolios are. Depth refers to how many individual securities comprise an ETF, while balance refers to how “top heavy” a product is–what percentage of assets are concentrated in the ten largest individual positions.

Disclosure: No positions at time of writing.

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