SCHB vs. IEF: What’s The Difference?

The Schwab U.S. Broad Market ETF (SCHB) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. SCHB is a Schwab ETFs Large Blend fund and IEF is a iShares Long Government fund. So, what’s the difference between SCHB and IEF? And which fund is better?

The expense ratio of SCHB is 0.12 percentage points lower than IEF’s (0.03% vs. 0.15%). SCHB also has a high exposure to the technology sector while IEF is mostly comprised of AAA bonds. Overall, SCHB has provided higher returns than IEF over the past 10 years.

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

Summary

SCHB IEF
Name Schwab U.S. Broad Market ETF iShares 7-10 Year Treasury Bond ETF
Category Large Blend Long Government
Issuer Schwab ETFs iShares
AUM 21.44B 13.44B
Avg. Return 14.43% 5.06%
Div. Yield 1.39% 0.84%
Expense Ratio 0.03% 0.15%

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 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%.

SCHB’s dividend yield is 0.55% higher than that of IEF (1.39% vs. 0.84%). Also, SCHB yielded on average 9.37% more per year over the past decade (14.43% vs. 5.06%). The expense ratio of SCHB is 0.12 percentage points lower than IEF’s (0.03% vs. 0.15%).

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Fund Composition

Holdings

SCHB - Holdings

SCHB Holdings Weight
Apple Inc 4.86%
Microsoft Corp 4.61%
Amazon.com Inc 3.33%
Facebook Inc A 1.88%
Alphabet Inc A 1.66%
Alphabet Inc Class C 1.61%
Berkshire Hathaway Inc Class B 1.19%
Tesla Inc 1.18%
NVIDIA Corp 1.13%
JPMorgan Chase & Co 1.06%

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%.

IEF - Holdings

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.

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Risk Analysis

SCHB IEF
Mean Return 1.23 0.32
R-squared 99.33 77.56
Std. Deviation 14.12 5.42
Alpha -0.58 -1.2
Beta 1.04 1.59
Sharpe Ratio 1 0.6
Treynor Ratio 13.58 1.97

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

The iShares 7-10 Year Treasury Bond ETF (IEF) has a Treynor Ratio of 1.97 with a Sharpe Ratio of 0.6 and a Mean Return of 0.32. Its R-squared is 77.56 while IEF’s Standard Deviation is 5.42. Furthermore, the fund has a Beta of 1.59 and a Alpha of -1.2.

SCHB’s Mean Return is 0.91 points higher than that of IEF and its R-squared is 21.77 points higher. With a Standard Deviation of 14.12, SCHB is slightly more volatile than IEF. The Alpha and Beta of SCHB are 0.62 points higher and 0.55 points lower than IEF’s Alpha and Beta.

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Performance

Annual Returns

SCHB vs. IEF - Annual Returns

Year SCHB IEF
2020 20.77% 9.84%
2019 30.94% 8.38%
2018 -5.25% 0.82%
2017 21.18% 2.47%
2016 12.56% 1.0%
2015 0.45% 1.55%
2014 12.67% 8.92%
2013 33.37% -6.12%
2012 16.22% 4.06%
2011 1.4% 15.46%
2010 17.1% 9.29%

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 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

SCHB vs. IEF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SCHB $10,000 $36,354 14.43%
IEF $10,000 $15,497 5.06%

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 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%.

SCHB’s CAGR is 9.37 percentage points higher than that of IEF and as a result, would have yielded $20,857 more on a $10,000 investment. Thus, SCHB outperformed IEF by 9.37% annually.


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