What type of assets do VGSH and VTIP hold?

VGSH invests in short-term government bonds, while VTIP holds inflation-protected securities. Both are bond funds, but they respond differently to interest rate changes and inflation. Government bonds offer stability, whereas inflation-protected bonds aim to preserve purchasing power. The funds do not overlap in their top holdings, meaning they serve distinct roles in a portfolio. Understanding this distinction helps investors interpret why each fund behaves differently under varying economic conditions and how they complement fixed-income strategies.

How do these funds differ in tracking inflation?

VTIP adjusts its principal based on inflation, linking payouts to consumer price index changes. This provides a hedge against rising prices. VGSH does not adjust for inflation; its returns remain fixed in nominal terms, which means its real value could decrease if inflation rises. Investors seeking protection from inflation should understand the structural differences in how each fund tracks its respective index. The expense ratios are identical, so cost is not a differentiator.

What are the dividend yields for VGSH and VTIP?

As of September 2026, VGSH has a dividend yield of 3.79%, while VTIP yields 4.18%. The higher yield for VTIP reflects the inflation-adjusted payouts from its securities. Both funds distribute dividends regularly, typically every six months. Yield can fluctuate based on market conditions and the composition of the underlying bonds. It’s important to view yield as one part of total return, not the sole indicator of fund performance.

Do these funds share any top holdings?

No, VGSH and VTIP have no shared top ten holdings. VGSH invests exclusively in short-term government debt, while VTIP holds Treasury Inflation-Protected Securities. This ensures distinct exposure: one is purely nominal government credit risk with short duration, and the other is inflation-linked credit risk. The lack of overlap means the funds serve complementary, not duplicative, roles in a portfolio, allowing investors to diversify their fixed-income exposure across different bond types.

Which fund is more sensitive to interest rate changes?

VGSH is more sensitive to direct interest rate changes because its bonds have fixed coupons and no inflation adjustment. If interest rates rise, the market value of VGSH's holdings tends to fall, impacting the fund's price. VTIP's principal adjusts with inflation, which often correlates with rates but not always directly. Both funds focus on short maturities, limiting duration risk, but VGSH lacks the inflation-linked buffer, making it more susceptible to real yield erosion.

How do these ETFs react to high inflation?

During periods of high inflation, VTIP generally performs better in real terms because its principal is adjusted upwards with inflation, protecting purchasing power. VGSH's fixed coupons and principal do not adjust, so its real value declines when inflation exceeds its yield. However, VTIP is more volatile in the short term due to the mechanics of its principal adjustment. Investors compare the two primarily based on their inflation expectations and risk tolerance.

What are the costs for owning these funds?

Both VGSH and VTIP have identical expense ratios of 0.03%. This low cost means the annual management fees are the same regardless of which fund you choose. The expense ratio is deducted from the fund's net assets, so it reduces the yield over time. Investors must compare the net cost, which is equal, to the potential returns from inflation protection versus nominal yield to assess the value.

Do these funds have significant tracking differences?

Yes. VGSH tracks short-term nominal government bonds, while VTIP tracks short-term inflation-protected Treasury securities. This is a fundamental difference in what the funds aim to replicate. VGSH offers exposure to traditional short-term government debt, where the primary risks are credit and interest rate fluctuation. VTIP tracks bonds specifically designed to combat inflation, where the main advantage is real value preservation.

What investment goals do these funds typically serve?

Investors often use VGSH to maintain capital stability and generate income from a traditional short-term government bond portfolio, with an emphasis on nominal returns. Conversely, VTIP is frequently selected by investors seeking protection against rising consumer prices, with a focus on preserving purchasing power. Understanding the primary goal of each fund helps in interpreting why one may outperform or underperform the other during specific periods.

VGSH vs VTIP

Two funds, one decision: we compare cost, performance and what each ETF actually holds in September 2026.

This page compares VGSH (Vanguard Short-Term Government Bond ETF) and VTIP (Vanguard Short-Term Inflation-Protected Secs ETF), reviewing fees, holdings, dividends and how each fund tracks its market. VGSH offers a 3.79% dividend yield on $34.8bn assets, while VTIP provides a 4.18% yield on $20.8bn. Both feature a 0.03% expense ratio. Educational content, not financial advice.

Fund Snapshot

Key Fund Metrics

VGSH

Metric

VTIP

0.03%

Expense Ratio

0.03%

3.79%

Dividend Yield

4.18%

$34.84B

Net Assets

$20.75B

Holdings

Nov 19, 2009

Inception Date

Oct 12, 2012

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Index Tracked

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Short Government

Fund Category

Short-Term Inflation-Protected Bond

Both funds charge the same annual fee.

Shared Top Holdings

These funds do not share any of their top holdings.

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Investment Analysis

VGSH

Pros

Considerations

VTIP

Pros

Considerations

About VGSH and VTIP

VGSH (VGSH)

The Vanguard Short-Term Government Bond ETF (VGSH) is an exchange-traded fund designed to help investors gain exposure to a market-weighted index of US government bonds with relatively short maturities. As part of the Vanguard family, it offers a widely recognised approach to bond investing, often characterised by low costs and transparency. The fund’s strategy focuses on shorter-duration government debt, which can be a key component of a diversified portfolio. Investors should note that, as with any investment, values can rise and fall. Interest rates, inflation, and economic conditions can affect both the capital value and the income generated by the fund. The stated expense ratio is 0.03%, and it reports net assets of USD 34.84 billion. It’s important to consider your own circumstances and risk tolerance when evaluating bonds and bond-based ETFs.

VTIP (VTIP)

The Vanguard Short-Term Inflation-Protected Securities ETF is designed to offer investors exposure to US Treasury Inflation-Protected Securities (TIPS) with a short duration. By focusing on bonds maturing in roughly less than five years, this fund aims to help mitigate the eroding effects of inflation on capital while providing a relatively stable income stream. It seeks to track a specific benchmark index of investment-grade, fixed-income, inflation-indexed bonds issued by the US Government. With a very low expense ratio of 0.03%, it is an affordable option for those looking to diversify their bond portfolios. While the underlying securities are guaranteed by the US government, the value of the fund's shares can fluctuate due to changes in real interest rates and market conditions. This asset class is often viewed as a defensive holding during periods of rising prices, though it may not match the growth potential of equities. Investors should consider their risk tolerance and investment horizon, as short-term bond returns are subject to market variability.

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VGSH vs VTIP

Fund Snapshot