AGG vs. SCHP: What’s The Difference?

The iShares Core U.S. Aggregate Bond ETF (AGG) and the Schwab U.S. TIPS ETF (SCHP) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and SCHP is a Schwab ETFs Inflation-Protected Bond fund. So, what’s the difference between AGG and SCHP? And which fund is better?

The expense ratio of AGG is 0.01 percentage points lower than SCHP’s (0.04% vs. 0.05%). AGG is mostly comprised of AAA bonds and SCHP has a high exposure to AAA bond. Overall, AGG has provided higher returns than SCHP over the past ten years.

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

Summary

AGG SCHP
Name iShares Core U.S. Aggregate Bond ETF Schwab U.S. TIPS ETF
Category Intermediate-Term Bond Inflation-Protected Bond
Issuer iShares Schwab ETFs
AUM 88.8B 18.41B
Avg. Return 4.04% 3.92%
Div. Yield 1.95% 1.97%
Expense Ratio 0.04% 0.05%

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. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.

AGG’s dividend yield is 0.02% lower than that of SCHP (1.95% vs. 1.97%). Also, AGG yielded on average 0.12% more per year over the past decade (4.04% vs. 3.92%). The expense ratio of AGG is 0.01 percentage points lower than SCHP’s (0.04% vs. 0.05%).

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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.

SCHP - Holdings

SCHP Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SCHP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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Risk Analysis

AGG SCHP
Mean Return 0.28 0.28
R-squared 99.96 66.16
Std. Deviation 3.03 4.32
Alpha -0.08 -0.5
Beta 1.01 1.17
Sharpe Ratio 0.9 0.64
Treynor Ratio 2.7 2.31

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

The Schwab U.S. TIPS ETF (SCHP) has a Treynor Ratio of 2.31 with a Standard Deviation of 4.32 and a Alpha of -0.5. Its Beta is 1.17 while SCHP’s Sharpe Ratio is 0.64. Furthermore, the fund has a Mean Return of 0.28 and a R-squared of 66.16.

AGG’s Mean Return is 0.00 points lower than that of SCHP and its R-squared is 33.80 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than SCHP. The Alpha and Beta of AGG are 0.42 points higher and 0.16 points lower than SCHP’s Alpha and Beta.

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Performance

Annual Returns

AGG vs. SCHP - Annual Returns

Year AGG SCHP
2020 7.42% 10.94%
2019 8.68% 8.36%
2018 -0.05% -1.31%
2017 3.53% 2.95%
2016 2.56% 4.6%
2015 0.48% -1.5%
2014 6.04% 3.56%
2013 -2.15% -8.66%
2012 4.04% 6.83%
2011 7.58% 13.38%
2010 6.3% 0.0%

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 2011 was the strongest year for SCHP, returning 13.38% on an annual basis. The poorest year for SCHP in the last ten years was 2013, with a yield of -8.66%. Most years the Schwab U.S. TIPS ETF has given investors modest returns, such as in 2017, 2014, and 2016, when gains were 2.95%, 3.56%, and 4.6% respectively.

Portfolio Growth

AGG vs. SCHP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
AGG $10,000 $14,457 4.04%
SCHP $10,000 $14,418 3.92%

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 SCHP, the end total would have been $14,418. This equates to a $4,418 profit over 10 years and a compound annual growth rate (CAGR) of 3.92%.

AGG’s CAGR is 0.12 percentage points higher than that of SCHP and as a result, would have yielded $39 more on a $10,000 investment. Thus, AGG outperformed SCHP by 0.12% annually.


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