The Schwab U.S. Small-Cap ETF (SCHA) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. SCHA is a Schwab ETFs Small Blend fund and IEF is a iShares Long Government fund. So, what’s the difference between SCHA and IEF? And which fund is better?
The expense ratio of SCHA is 0.11 percentage points lower than IEF’s (0.04% vs. 0.15%). SCHA also has a high exposure to the healthcare sector while IEF is mostly comprised of AAA bonds. Overall, SCHA has provided higher returns than IEF over the past 10 years.
In this article, we’ll compare SCHA vs. IEF. We’ll look at holdings and performance, as well as at their portfolio growth and risk metrics. Moreover, I’ll also discuss SCHA’s and IEF’s fund composition, industry exposure, and annual returns and examine how these affect their overall returns.
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Summary
| SCHA | IEF | |
| Name | Schwab U.S. Small-Cap ETF | iShares 7-10 Year Treasury Bond ETF |
| Category | Small Blend | Long Government |
| Issuer | Schwab ETFs | iShares |
| AUM | 16.51B | 13.44B |
| Avg. Return | 12.62% | 5.06% |
| Div. Yield | 0.98% | 0.84% |
| Expense Ratio | 0.04% | 0.15% |
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 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
SCHA’s dividend yield is 0.14% higher than that of IEF (0.98% vs. 0.84%). Also, SCHA yielded on average 7.56% more per year over the past decade (12.62% vs. 5.06%). The expense ratio of SCHA is 0.11 percentage points lower than IEF’s (0.04% vs. 0.15%).
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Fund Composition
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%.
| IEF 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% |
IEF’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
| SCHA | IEF | |
| Mean Return | 1.14 | 0.32 |
| R-squared | 82.26 | 77.56 |
| Std. Deviation | 18.68 | 5.42 |
| Alpha | -4.65 | -1.2 |
| Beta | 1.25 | 1.59 |
| Sharpe Ratio | 0.7 | 0.6 |
| Treynor Ratio | 9.62 | 1.97 |
The Schwab U.S. Small-Cap ETF (SCHA) has a Standard Deviation of 18.68 with a R-squared of 82.26 and a Alpha of -4.65. Its Treynor Ratio is 9.62 while SCHA’s Beta is 1.25. Furthermore, the fund has a Sharpe Ratio of 0.7 and a Mean Return of 1.14.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Beta of 1.59 with a Standard Deviation of 5.42 and a Mean Return of 0.32. Its R-squared is 77.56 while IEF’s Alpha is -1.2. Furthermore, the fund has a Sharpe Ratio of 0.6 and a Treynor Ratio of 1.97.
SCHA’s Mean Return is 0.82 points higher than that of IEF and its R-squared is 4.70 points higher. With a Standard Deviation of 18.68, SCHA is slightly more volatile than IEF. The Alpha and Beta of SCHA are 3.45 points lower and 0.34 points lower than IEF’s Alpha and Beta.
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Performance
Annual Returns
| Year | SCHA | IEF |
| 2020 | 19.35% | 9.84% |
| 2019 | 26.54% | 8.38% |
| 2018 | -11.75% | 0.82% |
| 2017 | 15.04% | 2.47% |
| 2016 | 19.88% | 1.0% |
| 2015 | -4.24% | 1.55% |
| 2014 | 6.53% | 8.92% |
| 2013 | 39.59% | -6.12% |
| 2012 | 18.24% | 4.06% |
| 2011 | -2.95% | 15.46% |
| 2010 | 28.31% | 9.29% |
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 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| SCHA | $10,000 | $30,035 | 12.62% |
| IEF | $10,000 | $15,497 | 5.06% |
A $10,000 investment in SCHA would have resulted in a final balance of $30,035. This is a profit of $20,035 over 10 years and amounts to a compound annual growth rate (CAGR) of 12.62%.
With a $10,000 investment in IEF, the end total would have been $15,497. This equates to a $5,497 profit over 10 years and a compound annual growth rate (CAGR) of 5.06%.
SCHA’s CAGR is 7.56 percentage points higher than that of IEF and as a result, would have yielded $14,538 more on a $10,000 investment. Thus, SCHA outperformed IEF by 7.56% annually.
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