AGG vs. SCHF: What’s The Difference?

The iShares Core U.S. Aggregate Bond ETF (AGG) and the Schwab International Equity ETF (SCHF) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and SCHF is a Schwab ETFs Foreign Large Blend fund. So, what’s the difference between AGG and SCHF? And which fund is better?

The expense ratio of AGG is 0.02 percentage points lower than SCHF’s (0.04% vs. 0.06%). AGG is mostly comprised of AAA bonds while SCHF has a high exposure to the financial services sector. Overall, AGG has provided lower returns than SCHF over the past ten years.

In this article, we’ll compare AGG vs. SCHF. We’ll look at performance and risk metrics, as well as at their annual returns and industry exposure. Moreover, I’ll also discuss AGG’s and SCHF’s holdings, fund composition, and portfolio growth and examine how these affect their overall returns.

Summary

AGG SCHF
Name iShares Core U.S. Aggregate Bond ETF Schwab International Equity ETF
Category Intermediate-Term Bond Foreign Large Blend
Issuer iShares Schwab ETFs
AUM 88.8B 26.99B
Avg. Return 4.04% 6.43%
Div. Yield 1.95% 2.16%
Expense Ratio 0.04% 0.06%

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 International Equity ETF (SCHF) is a Foreign Large Blend fund that is issued by Schwab ETFs. It currently has 26.99B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 2.16% with an expense ratio of 0.06%.

AGG’s dividend yield is 0.21% lower than that of SCHF (1.95% vs. 2.16%). Also, AGG yielded on average 2.39% less per year over the past decade (4.04% vs. 6.43%). The expense ratio of AGG is 0.02 percentage points lower than SCHF’s (0.04% vs. 0.06%).

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Fund Composition

Holdings

AGG - Holdings

AGG Bond Sectors Weight
AAA 68.92%
BBB 15.38%
A 11.16%
AA 2.92%
Others 1.63%
Below B 0.0%
B 0.0%
BB 0.0%
US Government 0.0%

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.

SCHF - Holdings

SCHF Holdings Weight
Nestle SA 1.66%
Samsung Electronics Co Ltd 1.6%
ASML Holding NV 1.29%
Roche Holding AG 1.24%
Toyota Motor Corp 1.02%
LVMH Moet Hennessy Louis Vuitton SE 0.93%
Novartis AG 0.92%
Shopify Inc A 0.78%
AstraZeneca PLC 0.75%
SAP SE 0.74%

SCHF’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.66%, 1.6%, 1.29%, 1.24%, and 1.02%.

LVMH Moet Hennessy Louis Vuitton SE (0.93%), Novartis AG (0.92%), and Shopify Inc A (0.78%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the SCHF’s holdings at 0.75% and 0.74%.

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Risk Analysis

AGG SCHF
Mean Return 0.28 0.58
R-squared 99.96 98.16
Std. Deviation 3.03 15.08
Alpha -0.08 0.53
Beta 1.01 0.99
Sharpe Ratio 0.9 0.42
Treynor Ratio 2.7 5.39

The iShares Core U.S. Aggregate Bond ETF (AGG) has a Alpha of -0.08 with a Standard Deviation of 3.03 and a Sharpe Ratio of 0.9. Its Beta is 1.01 while AGG’s Mean Return is 0.28. Furthermore, the fund has a R-squared of 99.96 and a Treynor Ratio of 2.7.

The Schwab International Equity ETF (SCHF) has a Beta of 0.99 with a Treynor Ratio of 5.39 and a Standard Deviation of 15.08. Its Mean Return is 0.58 while SCHF’s Alpha is 0.53. Furthermore, the fund has a Sharpe Ratio of 0.42 and a R-squared of 98.16.

AGG’s Mean Return is 0.30 points lower than that of SCHF and its R-squared is 1.80 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than SCHF. The Alpha and Beta of AGG are 0.61 points lower and 0.02 points higher than SCHF’s Alpha and Beta.

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Performance

Annual Returns

AGG vs. SCHF - Annual Returns

Year AGG SCHF
2020 7.42% 9.86%
2019 8.68% 22.15%
2018 -0.05% -14.39%
2017 3.53% 25.83%
2016 2.56% 2.88%
2015 0.48% -2.44%
2014 6.04% -4.44%
2013 -2.15% 20.03%
2012 4.04% 17.12%
2011 7.58% -12.32%
2010 6.3% 8.6%

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 2017 was the strongest year for SCHF, returning 25.83% on an annual basis. The poorest year for SCHF in the last ten years was 2018, with a yield of -14.39%. Most years the Schwab International Equity ETF has given investors modest returns, such as in 2016, 2010, and 2020, when gains were 2.88%, 8.6%, and 9.86% respectively.

Portfolio Growth

AGG vs. SCHF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
AGG $10,000 $14,457 4.04%
SCHF $10,000 $17,089 6.43%

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 SCHF, the end total would have been $17,089. This equates to a $7,089 profit over 10 years and a compound annual growth rate (CAGR) of 6.43%.

AGG’s CAGR is 2.39 percentage points lower than that of SCHF and as a result, would have yielded $2,632 less on a $10,000 investment. Thus, AGG performed worse than SCHF by 2.39% annually.


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