The iShares MBS ETF (MBB) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. MBB is a iShares Intermediate Government fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between MBB and SCHA? And which fund is better?
The expense ratio of MBB is 0.02 percentage points higher than SCHA’s (0.06% vs. 0.04%). MBB is mostly comprised of AAA bonds while SCHA has a high exposure to the healthcare sector. Overall, MBB has provided lower returns than SCHA over the past 10 years.
In this article, we’ll compare MBB vs. SCHA. We’ll look at performance and holdings, as well as at their risk metrics and portfolio growth. Moreover, I’ll also discuss MBB’s and SCHA’s annual returns, fund composition, and industry exposure and examine how these affect their overall returns.
|Name||iShares MBS ETF||Schwab U.S. Small-Cap ETF|
|Category||Intermediate Government||Small Blend|
The iShares MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.
The Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.
MBB’s dividend yield is 0.90% higher than that of SCHA (1.88% vs. 0.98%). Also, MBB yielded on average 9.55% less per year over the past decade (3.08% vs. 12.62%). The expense ratio of MBB is 0.02 percentage points higher than SCHA’s (0.06% 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).
|MBB Bond Sectors||Weight|
MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 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.
|AMC Entertainment Holdings Inc Class A||0.67%|
|Caesars Entertainment Inc||0.51%|
|Plug Power Inc||0.41%|
|10x Genomics Inc Ordinary Shares – Class A||0.34%|
|GameStop Corp Class A||0.28%|
|Penn National Gaming Inc||0.27%|
|Axon Enterprise Inc||0.27%|
SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.
10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.
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).
The iShares MBS ETF (MBB) has a Sharpe Ratio of 0.87 with a Alpha of 0.14 and a Standard Deviation of 2.12. Its R-squared is 74.38 while MBB’s Beta is 0.6. Furthermore, the fund has a Mean Return of 0.2 and a Treynor Ratio of 3.02.
The Schwab U.S. Small-Cap ETF (SCHA) has a Standard Deviation of 18.68 with a Alpha of -4.65 and a Treynor Ratio of 9.62. Its Mean Return is 1.14 while SCHA’s Sharpe Ratio is 0.7. Furthermore, the fund has a R-squared of 82.26 and a Beta of 1.25.
MBB’s Mean Return is 0.94 points lower than that of SCHA and its R-squared is 7.88 points lower. With a Standard Deviation of 2.12, MBB is slightly less volatile than SCHA. The Alpha and Beta of MBB are 4.79 points higher and 0.65 points lower than SCHA’s Alpha and Beta.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
MBB had its best year in 2019 with an annual return of 6.27%. MBB’s worst year over the past decade yielded -1.92% and occurred in 2013. In most years the iShares MBS ETF provided moderate returns such as in 2012, 2017, and 2020 where annual returns amounted to 2.23%, 2.37%, and 4.03% respectively.
The year 2013 was the strongest year for SCHA, returning 39.59% on an annual basis. The poorest year for SCHA in the last ten years was 2018, with a yield of -11.75%. Most years the Schwab U.S. Small-Cap ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 15.04%, 18.24%, and 19.35% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in MBB would have resulted in a final balance of $13,189. This is a profit of $3,189 over 10 years and amounts to a compound annual growth rate (CAGR) of 3.08%.
With a $10,000 investment in SCHA, the end total would have been $30,035. This equates to a $20,035 profit over 10 years and a compound annual growth rate (CAGR) of 12.62%.
MBB’s CAGR is 9.55 percentage points lower than that of SCHA and as a result, would have yielded $16,846 less on a $10,000 investment. Thus, MBB performed worse than SCHA by 9.55% annually.
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)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) 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!
3) 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!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.