SCHA vs. GOVT: What’s The Difference?

The Schwab U.S. Small-Cap ETF (SCHA) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. SCHA is a Schwab ETFs Small Blend fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between SCHA and GOVT? And which fund is better?

The expense ratio of SCHA is 0.01 percentage points lower than GOVT’s (0.04% vs. 0.05%). SCHA also has a high exposure to the healthcare sector while GOVT is mostly comprised of AAA bonds. Overall, SCHA has provided higher returns than GOVT over the past 8 years.

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

Summary

SCHA GOVT
Name Schwab U.S. Small-Cap ETF iShares U.S. Treasury Bond ETF
Category Small Blend Intermediate Government
Issuer Schwab ETFs iShares
AUM 16.51B 17.07B
Avg. Return 12.62% 2.67%
Div. Yield 0.98% 1.0%
Expense Ratio 0.04% 0.05%

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%.

The iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.

SCHA’s dividend yield is 0.02% lower than that of GOVT (0.98% vs. 1.0%). Also, SCHA yielded on average 9.95% more per year over the past decade (12.62% vs. 2.67%). The expense ratio of SCHA is 0.01 percentage points lower than GOVT’s (0.04% vs. 0.05%).

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

SCHA - Holdings

SCHA Holdings Weight
AMC Entertainment Holdings Inc Class A 0.67%
Caesars Entertainment Inc 0.51%
Cloudflare Inc 0.48%
NovoCure Ltd 0.45%
Plug Power Inc 0.41%
10x Genomics Inc Ordinary Shares – Class A 0.34%
GameStop Corp Class A 0.28%
RH 0.27%
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%.

GOVT - Holdings

GOVT 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%

GOVT’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.

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

SCHA GOVT
Mean Return 1.14 0
R-squared 82.26 0
Std. Deviation 18.68 0
Alpha -4.65 0
Beta 1.25 0
Sharpe Ratio 0.7 0
Treynor Ratio 9.62 0

The Schwab U.S. Small-Cap ETF (SCHA) has a Mean Return of 1.14 with a Standard Deviation of 18.68 and a R-squared of 82.26. Its Beta is 1.25 while SCHA’s Alpha is -4.65. Furthermore, the fund has a Treynor Ratio of 9.62 and a Sharpe Ratio of 0.7.

The iShares U.S. Treasury Bond ETF (GOVT) has a Mean Return of 0 with a Treynor Ratio of 0 and a Alpha of 0. Its Sharpe Ratio is 0 while GOVT’s R-squared is 0. Furthermore, the fund has a Standard Deviation of 0 and a Beta of 0.

SCHA’s Mean Return is 1.14 points higher than that of GOVT and its R-squared is 82.26 points higher. With a Standard Deviation of 18.68, SCHA is slightly more volatile than GOVT. The Alpha and Beta of SCHA are 4.65 points lower and 1.25 points higher than GOVT’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

SCHA vs. GOVT - Annual Returns

Year SCHA GOVT
2020 19.35% 7.92%
2019 26.54% 6.71%
2018 -11.75% 0.74%
2017 15.04% 2.19%
2016 19.88% 0.92%
2015 -4.24% 0.76%
2014 6.53% 4.99%
2013 39.59% -2.84%
2012 18.24% 0.0%
2011 -2.95% 0.0%
2010 28.31% 0.0%

SCHA had its best year in 2013 with an annual return of 39.59%. SCHA’s worst year over the past decade yielded -11.75% and occurred in 2018. In most years the Schwab U.S. Small-Cap ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 15.04%, 18.24%, and 19.35% respectively.

The year 2020 was the strongest year for GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.

Portfolio Growth

SCHA vs. GOVT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SCHA $10,000 $26,174 12.62%
GOVT $10,000 $12,297 2.67%

A $10,000 investment in SCHA would have resulted in a final balance of $26,174. This is a profit of $16,174 over 8 years and amounts to a compound annual growth rate (CAGR) of 12.62%.

With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.

SCHA’s CAGR is 9.95 percentage points higher than that of GOVT and as a result, would have yielded $13,877 more on a $10,000 investment. Thus, SCHA outperformed GOVT by 9.95% 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