SCHB vs. PFF: What’s The Difference?

The Schwab U.S. Broad Market ETF (SCHB) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. SCHB is a Schwab ETFs Large Blend fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between SCHB and PFF? And which fund is better?

The expense ratio of SCHB is 0.43 percentage points lower than PFF’s (0.03% vs. 0.46%). SCHB also has a higher exposure to the technology sector and a higher standard deviation. Overall, SCHB has provided higher returns than PFF over the past 10 years.

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

Summary

SCHB PFF
Name Schwab U.S. Broad Market ETF iShares Preferred and Income Securities ETF
Category Large Blend Preferred Stock
Issuer Schwab ETFs iShares
AUM 21.44B 19.8B
Avg. Return 14.43% 6.90%
Div. Yield 1.39% 4.47%
Expense Ratio 0.03% 0.46%

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 Preferred and Income Securities ETF (PFF) is a Preferred Stock fund that is issued by iShares. It currently has 19.8B total assets under management and has yielded an average annual return of 6.90% over the past 10 years. The fund has a dividend yield of 4.47% with an expense ratio of 0.46%.

SCHB’s dividend yield is 3.08% lower than that of PFF (1.39% vs. 4.47%). Also, SCHB yielded on average 7.53% more per year over the past decade (14.43% vs. 6.90%). The expense ratio of SCHB is 0.43 percentage points lower than PFF’s (0.03% vs. 0.46%).

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Fund Composition

Industry Exposure

SCHB vs. PFF - Industry Exposure

SCHB PFF
Technology 24.15% 0.0%
Industrials 9.29% 10.27%
Energy 2.78% 0.0%
Communication Services 10.52% 0.0%
Utilities 2.32% 81.81%
Healthcare 13.37% 3.54%
Consumer Defensive 5.76% 0.0%
Real Estate 3.58% 0.65%
Financial Services 13.88% 0.0%
Consumer Cyclical 11.9% 0.0%
Basic Materials 2.45% 3.74%

The Schwab U.S. Broad Market ETF (SCHB) has the most exposure to the Technology sector at 24.15%. This is followed by Financial Services and Healthcare at 13.88% and 13.37% respectively. Basic Materials (2.45%), Energy (2.78%), and Real Estate (3.58%) only make up 8.81% of the fund’s total assets.

SCHB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.76%, 9.29%, 10.52%, 11.9%, and 13.37%.

The iShares Preferred and Income Securities ETF (PFF) has the most exposure to the Utilities sector at 81.81%. This is followed by Industrials and Basic Materials at 10.27% and 3.74% respectively. Financial Services (0.0%), Consumer Defensive (0.0%), and Communication Services (0.0%) only make up 0.00% of the fund’s total assets.

PFF’s mid-section with moderate exposure is comprised of Energy, Technology, Real Estate, Healthcare, and Basic Materials stocks at 0.0%, 0.0%, 0.65%, 3.54%, and 3.74%.

SCHB is 24.15% more exposed to the Technology sector than PFF (24.15% vs 0.0%). SCHB’s exposure to Financial Services and Healthcare stocks is 13.88% higher and 9.83% higher respectively (13.88% vs. 0.0% and 13.37% vs. 3.54%). In total, Basic Materials, Energy, and Real Estate also make up 4.42% more of the fund’s holdings compared to PFF (8.81% vs. 4.39%).

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%.

PFF - Holdings

PFF Holdings Weight
Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A 2.54%
BlackRock Cash Funds Treasury SL Agency 2.3%
Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L- 1.79%
Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L- 1.49%
ArcelorMittal S.A. 5.5% 1.36%
Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A 1.35%
Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B 1.14%
NextEra Energy Inc Unit 1.12%
Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.4 1.08%
Avantor Inc Ser A 0.99%

PFF’s Top Holdings are Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A, BlackRock Cash Funds Treasury SL Agency, Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L-, Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L-, and ArcelorMittal S.A. 5.5% at 2.54%, 2.3%, 1.79%, 1.49%, and 1.36%.

Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A (1.35%), Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B (1.14%), and NextEra Energy Inc Unit (1.12%) have a slightly smaller but still significant weight. Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.4 and Avantor Inc Ser A are also represented in the PFF’s holdings at 1.08% and 0.99%.

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Risk Analysis

SCHB PFF
Mean Return 1.23 0.52
R-squared 99.33 9.39
Std. Deviation 14.12 7.87
Alpha -0.58 3.45
Beta 1.04 0.81
Sharpe Ratio 1 0.72
Treynor Ratio 13.58 6.79

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

The iShares Preferred and Income Securities ETF (PFF) has a R-squared of 9.39 with a Mean Return of 0.52 and a Treynor Ratio of 6.79. Its Alpha is 3.45 while PFF’s Sharpe Ratio is 0.72. Furthermore, the fund has a Beta of 0.81 and a Standard Deviation of 7.87.

SCHB’s Mean Return is 0.71 points higher than that of PFF and its R-squared is 89.94 points higher. With a Standard Deviation of 14.12, SCHB is slightly more volatile than PFF. The Alpha and Beta of SCHB are 4.03 points lower and 0.23 points higher than PFF’s Alpha and Beta.

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Performance

Annual Returns

SCHB vs. PFF - Annual Returns

Year SCHB PFF
2020 20.77% 7.94%
2019 30.94% 15.62%
2018 -5.25% -4.77%
2017 21.18% 8.33%
2016 12.56% 1.26%
2015 0.45% 4.62%
2014 12.67% 13.45%
2013 33.37% -0.59%
2012 16.22% 18.25%
2011 1.4% -2.2%
2010 17.1% 13.96%

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 2012 was the strongest year for PFF, returning 18.25% on an annual basis. The poorest year for PFF in the last ten years was 2018, with a yield of -4.77%. Most years the iShares Preferred and Income Securities ETF has given investors modest returns, such as in 2015, 2020, and 2017, when gains were 4.62%, 7.94%, and 8.33% respectively.

Portfolio Growth

SCHB vs. PFF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SCHB $10,000 $36,354 14.43%
PFF $10,000 $17,789 6.90%

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 PFF, the end total would have been $17,789. This equates to a $7,789 profit over 10 years and a compound annual growth rate (CAGR) of 6.90%.

SCHB’s CAGR is 7.53 percentage points higher than that of PFF and as a result, would have yielded $18,565 more on a $10,000 investment. Thus, SCHB outperformed PFF by 7.53% annually.


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