HYG vs. SCHG: What’s The Difference?

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the Schwab U.S. Large-Cap Growth ETF (SCHG) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and SCHG is a Schwab ETFs Large Growth fund. So, what’s the difference between HYG and SCHG? And which fund is better?

The expense ratio of HYG is 0.44 percentage points higher than SCHG’s (0.48% vs. 0.04%). HYG is mostly comprised of BB bonds while SCHG has a high exposure to the technology sector. Overall, HYG has provided lower returns than SCHG over the past 10 years.

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

Summary

HYG SCHG
Name iShares iBoxx $ High Yield Corporate Bond ETF Schwab U.S. Large-Cap Growth ETF
Category High Yield Bond Large Growth
Issuer iShares Schwab ETFs
AUM 20.03B 15.16B
Avg. Return 6.42% 17.81%
Div. Yield 4.44% 0.43%
Expense Ratio 0.48% 0.04%

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is a High Yield Bond fund that is issued by iShares. It currently has 20.03B total assets under management and has yielded an average annual return of 6.42% over the past 10 years. The fund has a dividend yield of 4.44% with an expense ratio of 0.48%.

The Schwab U.S. Large-Cap Growth ETF (SCHG) is a Large Growth fund that is issued by Schwab ETFs. It currently has 15.16B total assets under management and has yielded an average annual return of 17.81% over the past 10 years. The fund has a dividend yield of 0.43% with an expense ratio of 0.04%.

HYG’s dividend yield is 4.01% higher than that of SCHG (4.44% vs. 0.43%). Also, HYG yielded on average 11.39% less per year over the past decade (6.42% vs. 17.81%). The expense ratio of HYG is 0.44 percentage points higher than SCHG’s (0.48% vs. 0.04%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Holdings

HYG - Holdings

HYG Bond Sectors Weight
BB 56.53%
B 31.27%
Below B 11.4%
BBB 0.61%
AAA 0.28%
A 0.0%
AA 0.0%
US Government 0.0%
Others -0.09%

HYG’s Top Bond Sectors are ratings of BB, B, Below B, BBB, and AAA at 56.53%, 31.27%, 11.4%, 0.61%, and 0.28%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.

SCHG - Holdings

SCHG Holdings Weight
Apple Inc 11.49%
Microsoft Corp 10.91%
Amazon.com Inc 7.89%
Facebook Inc A 4.45%
Alphabet Inc A 3.93%
Alphabet Inc Class C 3.82%
Tesla Inc 2.8%
NVIDIA Corp 2.67%
Visa Inc Class A 2.12%
UnitedHealth Group Inc 2.02%

SCHG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 11.49%, 10.91%, 7.89%, 4.45%, and 3.93%.

Alphabet Inc Class C (3.82%), Tesla Inc (2.8%), and NVIDIA Corp (2.67%) have a slightly smaller but still significant weight. Visa Inc Class A and UnitedHealth Group Inc are also represented in the SCHG’s holdings at 2.12% and 2.02%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

HYG SCHG
Mean Return 0.46 1.46
R-squared 4.1 92.92
Std. Deviation 6.96 14.78
Alpha 3.58 1.97
Beta 0.48 1.05
Sharpe Ratio 0.7 1.14
Treynor Ratio 10.01 16.3

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Alpha of 3.58 with a R-squared of 4.1 and a Treynor Ratio of 10.01. Its Standard Deviation is 6.96 while HYG’s Mean Return is 0.46. Furthermore, the fund has a Beta of 0.48 and a Sharpe Ratio of 0.7.

The Schwab U.S. Large-Cap Growth ETF (SCHG) has a R-squared of 92.92 with a Mean Return of 1.46 and a Beta of 1.05. Its Standard Deviation is 14.78 while SCHG’s Treynor Ratio is 16.3. Furthermore, the fund has a Alpha of 1.97 and a Sharpe Ratio of 1.14.

HYG’s Mean Return is 1.00 points lower than that of SCHG and its R-squared is 88.82 points lower. With a Standard Deviation of 6.96, HYG is slightly less volatile than SCHG. The Alpha and Beta of HYG are 1.61 points higher and 0.57 points lower than SCHG’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

HYG vs. SCHG - Annual Returns

Year HYG SCHG
2020 4.12% 39.13%
2019 14.23% 36.21%
2018 -1.93% -1.35%
2017 6.09% 28.04%
2016 13.92% 6.76%
2015 -5.55% 3.26%
2014 2.0% 15.74%
2013 5.9% 33.96%
2012 13.83% 17.02%
2011 5.89% -0.67%
2010 12.07% 16.83%

HYG had its best year in 2019 with an annual return of 14.23%. HYG’s worst year over the past decade yielded -5.55% and occurred in 2015. In most years the iShares iBoxx $ High Yield Corporate Bond ETF provided moderate returns such as in 2011, 2013, and 2017 where annual returns amounted to 5.89%, 5.9%, and 6.09% respectively.

The year 2020 was the strongest year for SCHG, returning 39.13% on an annual basis. The poorest year for SCHG in the last ten years was 2018, with a yield of -1.35%. Most years the Schwab U.S. Large-Cap Growth ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 15.74%, 16.83%, and 17.02% respectively.

Portfolio Growth

HYG vs. SCHG - Portfolio Growth

Fund Initial Balance Final Balance CAGR
HYG $10,000 $17,335 6.42%
SCHG $10,000 $47,556 17.81%

A $10,000 investment in HYG would have resulted in a final balance of $17,335. This is a profit of $7,335 over 10 years and amounts to a compound annual growth rate (CAGR) of 6.42%.

With a $10,000 investment in SCHG, the end total would have been $47,556. This equates to a $37,556 profit over 10 years and a compound annual growth rate (CAGR) of 17.81%.

HYG’s CAGR is 11.39 percentage points lower than that of SCHG and as a result, would have yielded $30,221 less on a $10,000 investment. Thus, HYG performed worse than SCHG by 11.39% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply