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SCHB vs. GOVT: What’s The Difference?

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

The expense ratio of SCHB is 0.02 percentage points lower than GOVT’s (0.03% vs. 0.05%). SCHB also has a high exposure to the technology sector while GOVT is mostly comprised of AAA bonds. Overall, SCHB has provided higher returns than GOVT over the past 8 years.

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

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Summary

SCHBGOVT
NameSchwab U.S. Broad Market ETFiShares U.S. Treasury Bond ETF
CategoryLarge BlendIntermediate Government
IssuerSchwab ETFsiShares
AUM21.44B17.07B
Avg. Return14.43%2.67%
Div. Yield1.39%1.0%
Expense Ratio0.03%0.05%

The Schwab U.S. Broad Market ETF (SCHB) is a Large Blend fund that is issued by Schwab ETFs. It currently has 21.44B total assets under management and has yielded an average annual return of 14.43% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.03%.

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%.

SCHB’s dividend yield is 0.39% higher than that of GOVT (1.39% vs. 1.0%). Also, SCHB yielded on average 11.76% more per year over the past decade (14.43% vs. 2.67%). The expense ratio of SCHB is 0.02 percentage points lower than GOVT’s (0.03% vs. 0.05%).

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Fund Composition

Holdings

SCHB - Holdings

SCHB HoldingsWeight
Apple Inc4.86%
Microsoft Corp4.61%
Amazon.com Inc3.33%
Facebook Inc A1.88%
Alphabet Inc A1.66%
Alphabet Inc Class C1.61%
Berkshire Hathaway Inc Class B1.19%
Tesla Inc1.18%
NVIDIA Corp1.13%
JPMorgan Chase & Co1.06%

SCHB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 4.86%, 4.61%, 3.33%, 1.88%, and 1.66%.

Alphabet Inc Class C (1.61%), Berkshire Hathaway Inc Class B (1.19%), and Tesla Inc (1.18%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHB’s holdings at 1.13% and 1.06%.

GOVT - Holdings

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

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.

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Risk Analysis

SCHBGOVT
Mean Return1.230
R-squared99.330
Std. Deviation14.120
Alpha-0.580
Beta1.040
Sharpe Ratio10
Treynor Ratio13.580

The Schwab U.S. Broad Market ETF (SCHB) has a Sharpe Ratio of 1 with a Beta of 1.04 and a Standard Deviation of 14.12. Its Treynor Ratio is 13.58 while SCHB’s Mean Return is 1.23. Furthermore, the fund has a R-squared of 99.33 and a Alpha of -0.58.

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

SCHB’s Mean Return is 1.23 points higher than that of GOVT and its R-squared is 99.33 points higher. With a Standard Deviation of 14.12, SCHB is slightly more volatile than GOVT. The Alpha and Beta of SCHB are 0.58 points lower and 1.04 points higher than GOVT’s Alpha and Beta.

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Performance

Annual Returns

SCHB vs. GOVT - Annual Returns

YearSCHBGOVT
202020.77%7.92%
201930.94%6.71%
2018-5.25%0.74%
201721.18%2.19%
201612.56%0.92%
20150.45%0.76%
201412.67%4.99%
201333.37%-2.84%
201216.22%0.0%
20111.4%0.0%
201017.1%0.0%

SCHB had its best year in 2013 with an annual return of 33.37%. SCHB’s worst year over the past decade yielded -5.25% and occurred in 2018. In most years the Schwab U.S. Broad Market ETF provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 12.67%, 16.22%, and 17.1% 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

SCHB vs. GOVT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
SCHB$10,000$30,84914.43%
GOVT$10,000$12,2972.67%

A $10,000 investment in SCHB would have resulted in a final balance of $30,849. This is a profit of $20,849 over 8 years and amounts to a compound annual growth rate (CAGR) of 14.43%.

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%.

SCHB’s CAGR is 11.76 percentage points higher than that of GOVT and as a result, would have yielded $18,552 more on a $10,000 investment. Thus, SCHB outperformed GOVT by 11.76% annually.


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