The iShares Core U.S. Aggregate Bond ETF (AGG) and the Schwab U.S. Dividend Equity ETF (SCHD) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and SCHD is a Schwab ETFs Large Value fund. So, what’s the difference between AGG and SCHD? And which fund is better?
The expense ratio of AGG is 0.02 percentage points lower than SCHD’s (0.04% vs. 0.06%). AGG is mostly comprised of AAA bonds while SCHD has a high exposure to the financial services sector. Overall, AGG has provided lower returns than SCHD over the past ten years.
In this article, we’ll compare AGG vs. SCHD. We’ll look at annual returns and holdings, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss AGG’s and SCHD’s risk metrics, fund composition, and performance and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||Schwab U.S. Dividend Equity ETF|
|Category||Intermediate-Term Bond||Large Value|
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. Dividend Equity ETF (SCHD) is a Large Value fund that is issued by Schwab ETFs. It currently has 26B total assets under management and has yielded an average annual return of 14.80% over the past 10 years. The fund has a dividend yield of 2.89% with an expense ratio of 0.06%.
AGG’s dividend yield is 0.94% lower than that of SCHD (1.95% vs. 2.89%). Also, AGG yielded on average 10.76% less per year over the past decade (4.04% vs. 14.80%). The expense ratio of AGG is 0.02 percentage points lower than SCHD’s (0.04% vs. 0.06%).
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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.
|Merck & Co Inc||4.24%|
|The Home Depot Inc||4.19%|
|Texas Instruments Inc||4.16%|
|Verizon Communications Inc||3.96%|
|Cisco Systems Inc||3.96%|
SCHD’s Top Holdings are Merck & Co Inc, The Home Depot Inc, Texas Instruments Inc, Broadcom Inc, and Amgen Inc at 4.24%, 4.19%, 4.16%, 4.15%, and 4.11%.
PepsiCo Inc (4.09%), BlackRock Inc (4.05%), and Pfizer Inc (3.97%) have a slightly smaller but still significant weight. Verizon Communications Inc and Cisco Systems Inc are also represented in the SCHD’s holdings at 3.96% and 3.96%.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Alpha of -0.08 with a R-squared of 99.96 and a Standard Deviation of 3.03. Its Mean Return is 0.28 while AGG’s Beta is 1.01. Furthermore, the fund has a Sharpe Ratio of 0.9 and a Treynor Ratio of 2.7.
The Schwab U.S. Dividend Equity ETF (SCHD) has a Sharpe Ratio of 0 with a Alpha of 0 and a Mean Return of 0. Its Treynor Ratio is 0 while SCHD’s Standard Deviation is 0. Furthermore, the fund has a R-squared of 0 and a Beta of 0.
AGG’s Mean Return is 0.28 points higher than that of SCHD and its R-squared is 99.96 points higher. With a Standard Deviation of 3.03, AGG is slightly more volatile than SCHD. The Alpha and Beta of AGG are 0.08 points lower and 1.01 points higher than SCHD’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 SCHD, returning 32.9% on an annual basis. The poorest year for SCHD in the last ten years was 2018, with a yield of -5.46%. Most years the Schwab U.S. Dividend Equity ETF has given investors modest returns, such as in 2012, 2014, and 2020, when gains were 11.4%, 11.66%, and 15.11% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in AGG would have resulted in a final balance of $12,917. This is a profit of $2,917 over 8 years and amounts to a compound annual growth rate (CAGR) of 4.04%.
With a $10,000 investment in SCHD, the end total would have been $28,823. This equates to a $18,823 profit over 8 years and a compound annual growth rate (CAGR) of 14.80%.
AGG’s CAGR is 10.76 percentage points lower than that of SCHD and as a result, would have yielded $15,906 less on a $10,000 investment. Thus, AGG performed worse than SCHD by 10.76% annually.
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