SCHB vs. VTIP: What’s The Difference?

The Schwab U.S. Broad Market ETF (SCHB) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. SCHB is a Schwab ETFs Large Blend fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between SCHB and VTIP? And which fund is better?

The expense ratio of SCHB is 0.02 percentage points lower than VTIP’s (0.03% vs. 0.05%). SCHB also has a high exposure to the technology sector while VTIP is mostly comprised of AAA bonds. Overall, SCHB has provided higher returns than VTIP over the past 7 years.

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

Summary

SCHB VTIP
Name Schwab U.S. Broad Market ETF Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares
Category Large Blend Inflation-Protected Bond
Issuer Schwab ETFs Vanguard
AUM 21.44B 50.67B
Avg. Return 14.43% 1.79%
Div. Yield 1.39% 1.35%
Expense Ratio 0.03% 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 Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.

SCHB’s dividend yield is 0.04% higher than that of VTIP (1.39% vs. 1.35%). Also, SCHB yielded on average 12.64% more per year over the past decade (14.43% vs. 1.79%). The expense ratio of SCHB is 0.02 percentage points lower than VTIP’s (0.03% vs. 0.05%).

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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%.

VTIP - Holdings

VTIP Bond Sectors Weight
AAA 99.87%
Others 0.13%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 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 VTIP
Mean Return 1.23 0
R-squared 99.33 0
Std. Deviation 14.12 0
Alpha -0.58 0
Beta 1.04 0
Sharpe Ratio 1 0
Treynor Ratio 13.58 0

The Schwab U.S. Broad Market ETF (SCHB) has a Standard Deviation of 14.12 with a Sharpe Ratio of 1 and a Alpha of -0.58. 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 Beta of 1.04.

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a Standard Deviation of 0 with a Treynor Ratio of 0 and a Sharpe Ratio of 0. Its Alpha is 0 while VTIP’s Beta is 0. Furthermore, the fund has a R-squared of 0 and a Mean Return of 0.

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

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Performance

Annual Returns

SCHB vs. VTIP - Annual Returns

Year SCHB VTIP
2020 20.77% 4.97%
2019 30.94% 4.83%
2018 -5.25% 0.54%
2017 21.18% 0.82%
2016 12.56% 2.71%
2015 0.45% -0.15%
2014 12.67% -1.17%
2013 33.37% -1.55%
2012 16.22% 0.0%
2011 1.4% 0.0%
2010 17.1% 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 VTIP, returning 4.97% on an annual basis. The poorest year for VTIP in the last ten years was 2013, with a yield of -1.55%. Most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 0.54% respectively.

Portfolio Growth

SCHB vs. VTIP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SCHB $10,000 $23,130 14.43%
VTIP $10,000 $11,305 1.79%

A $10,000 investment in SCHB would have resulted in a final balance of $23,130. This is a profit of $13,130 over 7 years and amounts to a compound annual growth rate (CAGR) of 14.43%.

With a $10,000 investment in VTIP, the end total would have been $11,305. This equates to a $1,305 profit over 7 years and a compound annual growth rate (CAGR) of 1.79%.

SCHB’s CAGR is 12.64 percentage points higher than that of VTIP and as a result, would have yielded $11,825 more on a $10,000 investment. Thus, SCHB outperformed VTIP by 12.64% annually.


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