AGG vs. SCHX: What’s The Difference?

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

The expense ratio of AGG is 0.01 percentage points higher than SCHX’s (0.04% vs. 0.03%). AGG is mostly comprised of AAA bonds while SCHX has a high exposure to the technology sector. Overall, AGG has provided lower returns than SCHX over the past ten years.

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

Summary

AGG SCHX
Name iShares Core U.S. Aggregate Bond ETF Schwab U.S. Large-Cap ETF
Category Intermediate-Term Bond Large Blend
Issuer iShares Schwab ETFs
AUM 88.8B 30.89B
Avg. Return 4.04% 14.60%
Div. Yield 1.95% 1.41%
Expense Ratio 0.04% 0.03%

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. Large-Cap ETF (SCHX) is a Large Blend fund that is issued by Schwab ETFs. It currently has 30.89B total assets under management and has yielded an average annual return of 14.60% over the past 10 years. The fund has a dividend yield of 1.41% with an expense ratio of 0.03%.

AGG’s dividend yield is 0.54% higher than that of SCHX (1.95% vs. 1.41%). Also, AGG yielded on average 10.56% less per year over the past decade (4.04% vs. 14.60%). The expense ratio of AGG is 0.01 percentage points higher than SCHX’s (0.04% vs. 0.03%).

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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.

SCHX - Holdings

SCHX Holdings Weight
Apple Inc 5.37%
Microsoft Corp 5.1%
Amazon.com Inc 3.69%
Facebook Inc A 2.08%
Alphabet Inc A 1.84%
Alphabet Inc Class C 1.78%
Berkshire Hathaway Inc Class B 1.32%
Tesla Inc 1.31%
NVIDIA Corp 1.25%
JPMorgan Chase & Co 1.18%

SCHX’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 5.37%, 5.1%, 3.69%, 2.08%, and 1.84%.

Alphabet Inc Class C (1.78%), Berkshire Hathaway Inc Class B (1.32%), and Tesla Inc (1.31%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHX’s holdings at 1.25% and 1.18%.

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Risk Analysis

AGG SCHX
Mean Return 0.28 1.24
R-squared 99.96 99.83
Std. Deviation 3.03 13.8
Alpha -0.08 -0.14
Beta 1.01 1.02
Sharpe Ratio 0.9 1.03
Treynor Ratio 2.7 14.06

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 Sharpe Ratio of 0.9. Its R-squared is 99.96 while AGG’s Alpha is -0.08. Furthermore, the fund has a Mean Return of 0.28 and a Beta of 1.01.

The Schwab U.S. Large-Cap ETF (SCHX) has a Mean Return of 1.24 with a Beta of 1.02 and a Treynor Ratio of 14.06. Its Sharpe Ratio is 1.03 while SCHX’s Standard Deviation is 13.8. Furthermore, the fund has a R-squared of 99.83 and a Alpha of -0.14.

AGG’s Mean Return is 0.96 points lower than that of SCHX and its R-squared is 0.13 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than SCHX. The Alpha and Beta of AGG are 0.06 points higher and 0.01 points lower than SCHX’s Alpha and Beta.

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Performance

Annual Returns

AGG vs. SCHX - Annual Returns

Year AGG SCHX
2020 7.42% 20.9%
2019 8.68% 31.4%
2018 -0.05% -4.52%
2017 3.53% 21.91%
2016 2.56% 11.78%
2015 0.48% 1.02%
2014 6.04% 13.33%
2013 -2.15% 32.54%
2012 4.04% 16.06%
2011 7.58% 1.61%
2010 6.3% 15.88%

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 SCHX, returning 32.54% on an annual basis. The poorest year for SCHX in the last ten years was 2018, with a yield of -4.52%. Most years the Schwab U.S. Large-Cap ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.33%, 15.88%, and 16.06% respectively.

Portfolio Growth

AGG vs. SCHX - Portfolio Growth

Fund Initial Balance Final Balance CAGR
AGG $10,000 $14,457 4.04%
SCHX $10,000 $36,987 14.60%

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 SCHX, the end total would have been $36,987. This equates to a $26,987 profit over 10 years and a compound annual growth rate (CAGR) of 14.60%.

AGG’s CAGR is 10.56 percentage points lower than that of SCHX and as a result, would have yielded $22,530 less on a $10,000 investment. Thus, AGG performed worse than SCHX by 10.56% annually.


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