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

The expense ratio of MBB is 0.01 percentage points higher than SCHP’s (0.06% vs. 0.05%). MBB is mostly comprised of AAA bonds and SCHP has a high exposure to AAA bond. Overall, MBB has provided lower returns than SCHP over the past 10 years.

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

Summary

MBBSCHP
NameiShares MBS ETFSchwab U.S. TIPS ETF
CategoryIntermediate GovernmentInflation-Protected Bond
IssueriSharesSchwab ETFs
AUM25.69B18.41B
Avg. Return3.08%3.92%
Div. Yield1.88%1.97%
Expense Ratio0.06%0.05%

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. 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%.

MBB’s dividend yield is 0.09% lower than that of SCHP (1.88% vs. 1.97%). Also, MBB yielded on average 0.84% less per year over the past decade (3.08% vs. 3.92%). The expense ratio of MBB is 0.01 percentage points higher than SCHP’s (0.06% vs. 0.05%).

Fund Composition

Holdings

MBB - Holdings

MBB Bond SectorsWeight
AAA99.51%
Others0.49%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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.

SCHP - Holdings

SCHP Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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

MBBSCHP
Mean Return0.20.28
R-squared74.3866.16
Std. Deviation2.124.32
Alpha0.14-0.5
Beta0.61.17
Sharpe Ratio0.870.64
Treynor Ratio3.022.31

The iShares MBS ETF (MBB) has a Standard Deviation of 2.12 with a R-squared of 74.38 and a Beta of 0.6. Its Alpha is 0.14 while MBB’s Mean Return is 0.2. Furthermore, the fund has a Treynor Ratio of 3.02 and a Sharpe Ratio of 0.87.

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

MBB’s Mean Return is 0.08 points lower than that of SCHP and its R-squared is 8.22 points higher. With a Standard Deviation of 2.12, MBB is slightly less volatile than SCHP. The Alpha and Beta of MBB are 0.64 points higher and 0.57 points lower than SCHP’s Alpha and Beta.

Performance

Annual Returns

MBB vs. SCHP - Annual Returns

YearMBBSCHP
20204.03%10.94%
20196.27%8.36%
20180.81%-1.31%
20172.37%2.95%
20161.28%4.6%
20151.28%-1.5%
20146.16%3.56%
2013-1.92%-8.66%
20122.23%6.83%
20115.88%13.38%
20105.44%0.0%

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 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

MBB vs. SCHP - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
MBB$10,000$13,1893.08%
SCHP$10,000$14,4183.92%

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 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%.

MBB’s CAGR is 0.84 percentage points lower than that of SCHP and as a result, would have yielded $1,229 less on a $10,000 investment. Thus, MBB performed worse than SCHP by 0.84% annually.

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