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SCHB vs. HYG: What’s The Difference?

The Schwab U.S. Broad Market ETF (SCHB) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. SCHB is a Schwab ETFs Large Blend fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between SCHB and HYG? And which fund is better?

The expense ratio of SCHB is 0.45 percentage points lower than HYG’s (0.03% vs. 0.48%). SCHB also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, SCHB has provided higher returns than HYG over the past 10 years.

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

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Summary

SCHBHYG
NameSchwab U.S. Broad Market ETFiShares iBoxx $ High Yield Corporate Bond ETF
CategoryLarge BlendHigh Yield Bond
IssuerSchwab ETFsiShares
AUM21.44B20.03B
Avg. Return14.43%6.42%
Div. Yield1.39%4.44%
Expense Ratio0.03%0.48%

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 iBoxx $ High Yield Corporate Bond ETF (HYG) is a High Yield Bond fund that is issued by iShares. It currently has 20.03B total assets under management and has yielded an average annual return of 6.42% over the past 10 years. The fund has a dividend yield of 4.44% with an expense ratio of 0.48%.

SCHB’s dividend yield is 3.05% lower than that of HYG (1.39% vs. 4.44%). Also, SCHB yielded on average 8.02% more per year over the past decade (14.43% vs. 6.42%). The expense ratio of SCHB is 0.45 percentage points lower than HYG’s (0.03% vs. 0.48%).

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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%.

HYG - Holdings

HYG Bond SectorsWeight
BB56.53%
B31.27%
Below B11.4%
BBB0.61%
AAA0.28%
A0.0%
AA0.0%
US Government0.0%
Others-0.09%

HYG’s Top Bond Sectors are ratings of BB, B, Below B, BBB, and AAA at 56.53%, 31.27%, 11.4%, 0.61%, and 0.28%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.

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Risk Analysis

SCHBHYG
Mean Return1.230.46
R-squared99.334.1
Std. Deviation14.126.96
Alpha-0.583.58
Beta1.040.48
Sharpe Ratio10.7
Treynor Ratio13.5810.01

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

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Mean Return of 0.46 with a R-squared of 4.1 and a Treynor Ratio of 10.01. Its Standard Deviation is 6.96 while HYG’s Beta is 0.48. Furthermore, the fund has a Alpha of 3.58 and a Sharpe Ratio of 0.7.

SCHB’s Mean Return is 0.77 points higher than that of HYG and its R-squared is 95.23 points higher. With a Standard Deviation of 14.12, SCHB is slightly more volatile than HYG. The Alpha and Beta of SCHB are 4.16 points lower and 0.56 points higher than HYG’s Alpha and Beta.

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Performance

Annual Returns

SCHB vs. HYG - Annual Returns

YearSCHBHYG
202020.77%4.12%
201930.94%14.23%
2018-5.25%-1.93%
201721.18%6.09%
201612.56%13.92%
20150.45%-5.55%
201412.67%2.0%
201333.37%5.9%
201216.22%13.83%
20111.4%5.89%
201017.1%12.07%

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 2019 was the strongest year for HYG, returning 14.23% on an annual basis. The poorest year for HYG in the last ten years was 2015, with a yield of -5.55%. Most years the iShares iBoxx $ High Yield Corporate Bond ETF has given investors modest returns, such as in 2011, 2013, and 2017, when gains were 5.89%, 5.9%, and 6.09% respectively.

Portfolio Growth

SCHB vs. HYG - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
SCHB$10,000$36,35414.43%
HYG$10,000$17,3356.42%

A $10,000 investment in SCHB would have resulted in a final balance of $36,354. This is a profit of $26,354 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.43%.

With a $10,000 investment in HYG, the end total would have been $17,335. This equates to a $7,335 profit over 10 years and a compound annual growth rate (CAGR) of 6.42%.

SCHB’s CAGR is 8.02 percentage points higher than that of HYG and as a result, would have yielded $19,019 more on a $10,000 investment. Thus, SCHB outperformed HYG by 8.02% annually.


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