TDTT vs VTIP: Which ETF Is Better in 2026?
A metric-by-metric comparison of FlexShares iBoxx 3-Year Target Duration TIPS Index Fund (TDTT) and Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) — both US Bonds - TIPS funds — using ETFValuer's daily-updated rankings.
Educational content — not financial advice. Data as of July 25, 2026. ~5 minute read.
The Verdict
TDTT and VTIP compete directly — both are US Bonds - TIPS funds chasing the same job in a portfolio. That makes this a genuine either/or: the index each tracks, what it costs, and how it has handled drawdowns are what separate them, not the broad exposure they give you.
On ETFValuer's overall model — which blends return, risk-adjusted performance, cost, drawdown, size and volatility — VTIP scores higher: 60.0 (Grade C) versus 52.2 for TDTT. That doesn't make TDTT a bad fund; it means VTIP currently edges it out on this specific mix of factors. Read the metric-by-metric breakdown below before deciding which matters more for your own portfolio.
Head-to-Head: Every Metric
| TDTT | VTIP | |
|---|---|---|
| Category | US Bonds - TIPS | US Bonds - TIPS |
| Expense ratio | 0.18% | 0.03% |
| Fund size (AUM) | $2.6B | $71.1B |
| Dividend yield | 4.57% | 3.60% |
| 1-year return | +2.88% | +3.32% |
| 3-year return | +15.08% | +15.78% |
| Volatility | 1.91% | 1.56% |
| Max drawdown | -1.52% | -0.98% |
| Sharpe ratio | -1.11 | -1.08 |
| ETFValuer score | 52.2 | 60.0 |
| Grade | C | C |
| Overall rank | #364 | #247 |
Bold marks the better value in each row. "Better" is directional only (e.g. lower cost, higher return) — it isn't a recommendation by itself. See the full methodology.
Cost
VTIP is the cheaper fund, charging 0.03% a year versus 0.18% for TDTT — a gap of 0.15 percentage points (about $15.00/year on a $10,000 position) that compounds meaningfully over a multi-decade holding period. See the ETF Fee Calculator for the exact dollar impact at your investment size and horizon.
What TDTT's Fees Cost You
TDTT charges an expense ratio of 0.18% a year, deducted automatically from the fund's value. Small percentages compound into real money — adjust the figures below to see the impact on your own numbers.
Assumes a constant gross return and no additional contributions — a simplification, but it isolates exactly what the expense ratio costs. Try the full fee calculator to model contributions and compare any two funds.
Performance & Risk
Over the trailing 3 years, VTIP returned +15.78% versus +15.08% for TDTT — a gap of about 0.7 percentage points. On risk, VTIP has held up better historically, with a shallower max drawdown (-0.98% vs. -1.52%). VTIP currently has the better risk-adjusted return (Sharpe ratio of -1.08 vs. -1.11), meaning it delivered more return per unit of volatility taken on.
How Closely Do They Track Each Other?
Over the last 3.0 years of daily returns (752 shared trading days), TDTT and VTIP show a high correlation of 0.943 — closely related, but not identical. Holding both would add very little diversification: when one falls, the other almost always falls with it. Treat these as alternatives to each other, not as complements in the same portfolio.
| Measure | Value | What it means |
|---|---|---|
| Daily return correlation | 0.943 | High — closely related, but not identical |
| R-squared | 88.9% | 88.9% of TDTT's daily moves are explained by VTIP's |
| Tracking error (annualised) | 1.08% | Typical yearly spread between the two funds' returns |
| Annualised return over 3.0y | TDTT +4.90% · VTIP +5.06% | VTIP ahead by 0.16 points a year |
Correlation alone understates how far these can drift. Across every rolling 12-month window in the period, TDTT finished as much as +0.9 points ahead of VTIP at the best extreme and -0.8 points at the worst — a 1.6-point spread between the best and worst year of relative performance. Two funds can correlate tightly day to day and still deliver very different outcomes over any single year you happen to hold them.
Calculated from daily total returns over the trailing 3-year window, recomputed every day this site refreshes. Correlation of 1.00 means the two funds moved in lockstep; 0.00 means their daily moves were unrelated.
Holdings Overlap
TDTT and VTIP share no companies among their top 10 reported holdings. That points to genuinely different exposure, so holding both is more likely to diversify than to duplicate. Full portfolios may still overlap further down the list.
Based on the top 10 holdings in each fund's most recent SEC N-PORT-P filing.
Which One Should You Pick?
Lean TDTT if…
- Current income matters to you — it yields 4.57% against 3.60%
Lean VTIP if…
- You want the lower running cost — 0.03% vs 0.18%, about $15 a year less on a $10,000 position
- It has been the calmer ride (1.6% volatility vs 1.9%) with a shallower worst-case fall (-1.0% vs -1.5%)
- You want the deeper, more liquid market ($71B in assets vs $3B)
Whichever you pick, holding both at full weight is usually the wrong answer — see the overlap and correlation sections above.
Frequently Asked Questions
Is TDTT or VTIP better?
On ETFValuer's overall model — which blends return, risk-adjusted performance, cost, drawdown, size and volatility — VTIP scores higher: 60.0 (Grade C) versus 52.2 for TDTT. That doesn't make TDTT a bad fund; it means VTIP currently edges it out on this specific mix of factors. Read the metric-by-metric breakdown below before deciding which matters more for your own portfolio.
Which has the lower expense ratio, TDTT or VTIP?
VTIP currently has the lower expense ratio (0.03% vs. 0.18%).
Can I hold both TDTT and VTIP?
You can, though the benefit is limited. At a correlation of 0.94, TDTT and VTIP fall together far more often than not, so owning both adds complexity and a second expense ratio without much real diversification. Most investors are better served picking one.
Go deeper on either fund
Full daily-updated metrics, holdings context, and category peers.