SCHB vs. SHY: What’s The Difference?

The Schwab U.S. Broad Market ETF (SCHB) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. SCHB is a Schwab ETFs Large Blend fund and SHY is a iShares Short Government fund. So, what’s the difference between SCHB and SHY? And which fund is better?

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

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

Summary

SCHB SHY
Name Schwab U.S. Broad Market ETF iShares 1-3 Year Treasury Bond ETF
Category Large Blend Short Government
Issuer Schwab ETFs iShares
AUM 21.44B 19.51B
Avg. Return 14.43% 1.27%
Div. Yield 1.39% 0.46%
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 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.

SCHB’s dividend yield is 0.93% higher than that of SHY (1.39% vs. 0.46%). Also, SCHB yielded on average 13.16% more per year over the past decade (14.43% vs. 1.27%). The expense ratio of SCHB is 0.12 percentage points lower than SHY’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%.

SHY - Holdings

SHY Bond Sectors Weight
AAA 99.67%
Others 0.33%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 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 SHY
Mean Return 1.23 0.09
R-squared 99.33 39.11
Std. Deviation 14.12 0.89
Alpha -0.58 -0.03
Beta 1.04 0.18
Sharpe Ratio 1 0.54
Treynor Ratio 13.58 2.6

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

The iShares 1-3 Year Treasury Bond ETF (SHY) has a Standard Deviation of 0.89 with a Alpha of -0.03 and a Beta of 0.18. Its Sharpe Ratio is 0.54 while SHY’s R-squared is 39.11. Furthermore, the fund has a Treynor Ratio of 2.6 and a Mean Return of 0.09.

SCHB’s Mean Return is 1.14 points higher than that of SHY and its R-squared is 60.22 points higher. With a Standard Deviation of 14.12, SCHB is slightly more volatile than SHY. The Alpha and Beta of SCHB are 0.55 points lower and 0.86 points higher than SHY’s Alpha and Beta.

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Performance

Annual Returns

SCHB vs. SHY - Annual Returns

Year SCHB SHY
2020 20.77% 3.01%
2019 30.94% 3.42%
2018 -5.25% 1.45%
2017 21.18% 0.27%
2016 12.56% 0.75%
2015 0.45% 0.43%
2014 12.67% 0.48%
2013 33.37% 0.23%
2012 16.22% 0.31%
2011 1.4% 1.43%
2010 17.1% 2.23%

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 SHY, returning 3.42% on an annual basis. The poorest year for SHY in the last ten years was 2013, with a yield of 0.23%. Most years the iShares 1-3 Year Treasury Bond ETF has given investors modest returns, such as in 2014, 2016, and 2011, when gains were 0.48%, 0.75%, and 1.43% respectively.

Portfolio Growth

SCHB vs. SHY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SCHB $10,000 $36,354 14.43%
SHY $10,000 $11,235 1.27%

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 SHY, the end total would have been $11,235. This equates to a $1,235 profit over 10 years and a compound annual growth rate (CAGR) of 1.27%.

SCHB’s CAGR is 13.16 percentage points higher than that of SHY and as a result, would have yielded $25,119 more on a $10,000 investment. Thus, SCHB outperformed SHY by 13.16% annually.


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