The Vanguard Total Bond Market Index Fund ETF Shares (BND) and the Schwab U.S. TIPS ETF (SCHP) are both among the Top 100 ETFs. BND is a Vanguard Intermediate-Term Bond fund and SCHP is a Schwab ETFs Inflation-Protected Bond fund. So, what’s the difference between BND and SCHP? And which fund is better?
The expense ratio of BND is 0.02 percentage points lower than SCHP’s (0.03% vs. 0.05%). BND is mostly comprised of AAA bonds and SCHP has a high exposure to AAA bond. Overall, BND has provided higher returns than SCHP over the past ten years.
In this article, we’ll compare BND vs. SCHP. We’ll look at fund composition and annual returns, as well as at their risk metrics and holdings. Moreover, I’ll also discuss BND’s and SCHP’s industry exposure, performance, and portfolio growth and examine how these affect their overall returns.
Summary
| BND | SCHP | |
| Name | Vanguard Total Bond Market Index Fund ETF Shares | Schwab U.S. TIPS ETF |
| Category | Intermediate-Term Bond | Inflation-Protected Bond |
| Issuer | Vanguard | Schwab ETFs |
| AUM | 312.15B | 18.41B |
| Avg. Return | 4.09% | 3.92% |
| Div. Yield | 2.02% | 1.97% |
| Expense Ratio | 0.03% | 0.05% |
The Vanguard Total Bond Market Index Fund ETF Shares (BND) is a Intermediate-Term Bond fund that is issued by Vanguard. It currently has 312.15B total assets under management and has yielded an average annual return of 4.09% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.03%.
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%.
BND’s dividend yield is 0.05% higher than that of SCHP (2.02% vs. 1.97%). Also, BND yielded on average 0.18% more per year over the past decade (4.09% vs. 3.92%). The expense ratio of BND is 0.02 percentage points lower than SCHP’s (0.03% vs. 0.05%).
Fund Composition
Holdings
| BND Bond Sectors | Weight |
| AAA | 68.72% |
| BBB | 16.17% |
| A | 11.87% |
| AA | 3.34% |
| Below B | 0.01% |
| B | 0.0% |
| BB | 0.0% |
| US Government | 0.0% |
| Others | -0.11% |
BND’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Below B at 68.72%, 16.17%, 11.87%, 3.34%, and 0.01%. The fund is less weighted towards B (0.0%), BB (0.0%), and US Government (0.0%) rated bonds.
| 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.
Risk Analysis
| BND | SCHP | |
| Mean Return | 0.28 | 0.28 |
| R-squared | 99.34 | 66.16 |
| Std. Deviation | 3.14 | 4.32 |
| Alpha | -0.14 | -0.5 |
| Beta | 1.04 | 1.17 |
| Sharpe Ratio | 0.88 | 0.64 |
| Treynor Ratio | 2.64 | 2.31 |
The Vanguard Total Bond Market Index Fund ETF Shares (BND) has a Sharpe Ratio of 0.88 with a R-squared of 99.34 and a Treynor Ratio of 2.64. Its Mean Return is 0.28 while BND’s Alpha is -0.14. Furthermore, the fund has a Beta of 1.04 and a Standard Deviation of 3.14.
The Schwab U.S. TIPS ETF (SCHP) has a Alpha of -0.5 with a Beta of 1.17 and a R-squared of 66.16. Its Sharpe Ratio is 0.64 while SCHP’s Standard Deviation is 4.32. Furthermore, the fund has a Treynor Ratio of 2.31 and a Mean Return of 0.28.
BND’s Mean Return is 0.00 points lower than that of SCHP and its R-squared is 33.18 points higher. With a Standard Deviation of 3.14, BND is slightly less volatile than SCHP. The Alpha and Beta of BND are 0.36 points higher and 0.13 points lower than SCHP’s Alpha and Beta.
Performance
Annual Returns
| Year | BND | SCHP |
| 2020 | 7.71% | 10.94% |
| 2019 | 8.71% | 8.36% |
| 2018 | -0.04% | -1.31% |
| 2017 | 3.62% | 2.95% |
| 2016 | 2.57% | 4.6% |
| 2015 | 0.39% | -1.5% |
| 2014 | 5.96% | 3.56% |
| 2013 | -2.14% | -8.66% |
| 2012 | 4.04% | 6.83% |
| 2011 | 7.71% | 13.38% |
| 2010 | 6.51% | 0.0% |
BND had its best year in 2019 with an annual return of 8.71%. BND’s worst year over the past decade yielded -2.14% and occurred in 2013. In most years the Vanguard Total Bond Market Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2014 where annual returns amounted to 3.62%, 4.04%, and 5.96% 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
| Fund | Initial Balance | Final Balance | CAGR |
| BND | $10,000 | $14,511 | 4.09% |
| SCHP | $10,000 | $14,418 | 3.92% |
A $10,000 investment in BND would have resulted in a final balance of $14,511. This is a profit of $4,511 over 10 years and amounts to a compound annual growth rate (CAGR) of 4.09%.
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%.
BND’s CAGR is 0.18 percentage points higher than that of SCHP and as a result, would have yielded $93 more on a $10,000 investment. Thus, BND outperformed SCHP by 0.18% annually.
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