The iShares Core U.S. Aggregate Bond ETF (AGG) and the Schwab U.S. Broad Market ETF (SCHB) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and SCHB is a Schwab ETFs Large Blend fund. So, what’s the difference between AGG and SCHB? And which fund is better?
The expense ratio of AGG is 0.01 percentage points higher than SCHB’s (0.04% vs. 0.03%). AGG is mostly comprised of AAA bonds while SCHB has a high exposure to the technology sector. Overall, AGG has provided lower returns than SCHB over the past ten years.
In this article, we’ll compare AGG vs. SCHB. We’ll look at risk metrics and portfolio growth, as well as at their performance and fund composition. Moreover, I’ll also discuss AGG’s and SCHB’s holdings, annual returns, and industry exposure and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||Schwab U.S. Broad Market ETF|
|Category||Intermediate-Term Bond||Large Blend|
The iShares Core U.S. Aggregate Bond ETF (AGG) is a Intermediate-Term Bond fund that is issued by iShares. It currently has 88.8B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.95% with an expense ratio of 0.04%.
The Schwab U.S. Broad Market ETF (SCHB) is a Large Blend fund that is issued by Schwab ETFs. It currently has 21.44B total assets under management and has yielded an average annual return of 14.43% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.03%.
AGG’s dividend yield is 0.56% higher than that of SCHB (1.95% vs. 1.39%). Also, AGG yielded on average 10.39% less per year over the past decade (4.04% vs. 14.43%). The expense ratio of AGG is 0.01 percentage points higher than SCHB’s (0.04% vs. 0.03%).
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|AGG Bond Sectors||Weight|
AGG’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 68.92%, 15.38%, 11.16%, 2.92%, and 1.63%. The fund is less weighted towards Below B (0.0%), B (0.0%), and BB (0.0%) rated bonds.
|Facebook Inc A||1.88%|
|Alphabet Inc A||1.66%|
|Alphabet Inc Class C||1.61%|
|Berkshire Hathaway Inc Class B||1.19%|
|JPMorgan Chase & Co||1.06%|
SCHB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 4.86%, 4.61%, 3.33%, 1.88%, and 1.66%.
Alphabet Inc Class C (1.61%), Berkshire Hathaway Inc Class B (1.19%), and Tesla Inc (1.18%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHB’s holdings at 1.13% and 1.06%.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Standard Deviation of 3.03 with a Treynor Ratio of 2.7 and a R-squared of 99.96. Its Sharpe Ratio is 0.9 while AGG’s Alpha is -0.08. Furthermore, the fund has a Beta of 1.01 and a Mean Return of 0.28.
The Schwab U.S. Broad Market ETF (SCHB) has a R-squared of 99.33 with a Beta of 1.04 and a Sharpe Ratio of 1. Its Treynor Ratio is 13.58 while SCHB’s Mean Return is 1.23. Furthermore, the fund has a Standard Deviation of 14.12 and a Alpha of -0.58.
AGG’s Mean Return is 0.95 points lower than that of SCHB and its R-squared is 0.63 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than SCHB. The Alpha and Beta of AGG are 0.50 points higher and 0.03 points lower than SCHB’s Alpha and Beta.
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AGG had its best year in 2019 with an annual return of 8.68%. AGG’s worst year over the past decade yielded -2.15% and occurred in 2013. In most years the iShares Core U.S. Aggregate Bond ETF provided moderate returns such as in 2017, 2012, and 2014 where annual returns amounted to 3.53%, 4.04%, and 6.04% respectively.
The year 2013 was the strongest year for SCHB, returning 33.37% on an annual basis. The poorest year for SCHB in the last ten years was 2018, with a yield of -5.25%. Most years the Schwab U.S. Broad Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 12.67%, 16.22%, and 17.1% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in AGG would have resulted in a final balance of $14,457. This is a profit of $4,457 over 10 years and amounts to a compound annual growth rate (CAGR) of 4.04%.
With a $10,000 investment in SCHB, the end total would have been $36,354. This equates to a $26,354 profit over 10 years and a compound annual growth rate (CAGR) of 14.43%.
AGG’s CAGR is 10.39 percentage points lower than that of SCHB and as a result, would have yielded $21,897 less on a $10,000 investment. Thus, AGG performed worse than SCHB by 10.39% annually.
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