SCHD vs. GOVT: What’s The Difference?

The Schwab U.S. Dividend Equity ETF (SCHD) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. SCHD is a Schwab ETFs Large Value fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between SCHD and GOVT? And which fund is better?

The expense ratio of SCHD is 0.01 percentage points higher than GOVT’s (0.06% vs. 0.05%). SCHD also has a high exposure to the financial services sector while GOVT is mostly comprised of AAA bonds. Overall, SCHD has provided higher returns than GOVT over the past 8 years.

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

Summary

SCHD GOVT
Name Schwab U.S. Dividend Equity ETF iShares U.S. Treasury Bond ETF
Category Large Value Intermediate Government
Issuer Schwab ETFs iShares
AUM 26B 17.07B
Avg. Return 14.80% 2.67%
Div. Yield 2.89% 1.0%
Expense Ratio 0.06% 0.05%

The Schwab U.S. Dividend Equity ETF (SCHD) is a Large Value fund that is issued by Schwab ETFs. It currently has 26B total assets under management and has yielded an average annual return of 14.80% over the past 10 years. The fund has a dividend yield of 2.89% with an expense ratio of 0.06%.

The iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.

SCHD’s dividend yield is 1.89% higher than that of GOVT (2.89% vs. 1.0%). Also, SCHD yielded on average 12.13% more per year over the past decade (14.80% vs. 2.67%). The expense ratio of SCHD is 0.01 percentage points higher than GOVT’s (0.06% vs. 0.05%).

Fund Composition

Holdings

SCHD - Holdings

SCHD Holdings Weight
Merck & Co Inc 4.24%
The Home Depot Inc 4.19%
Texas Instruments Inc 4.16%
Broadcom Inc 4.15%
Amgen Inc 4.11%
PepsiCo Inc 4.09%
BlackRock Inc 4.05%
Pfizer Inc 3.97%
Verizon Communications Inc 3.96%
Cisco Systems Inc 3.96%

SCHD’s Top Holdings are Merck & Co Inc, The Home Depot Inc, Texas Instruments Inc, Broadcom Inc, and Amgen Inc at 4.24%, 4.19%, 4.16%, 4.15%, and 4.11%.

PepsiCo Inc (4.09%), BlackRock Inc (4.05%), and Pfizer Inc (3.97%) have a slightly smaller but still significant weight. Verizon Communications Inc and Cisco Systems Inc are also represented in the SCHD’s holdings at 3.96% and 3.96%.

GOVT - Holdings

GOVT 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%

GOVT’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.

Risk Analysis

SCHD GOVT
Mean Return 0 0
R-squared 0 0
Std. Deviation 0 0
Alpha 0 0
Beta 0 0
Sharpe Ratio 0 0
Treynor Ratio 0 0

The Schwab U.S. Dividend Equity ETF (SCHD) has a R-squared of 0 with a Sharpe Ratio of 0 and a Standard Deviation of 0. Its Treynor Ratio is 0 while SCHD’s Alpha is 0. Furthermore, the fund has a Mean Return of 0 and a Beta of 0.

The iShares U.S. Treasury Bond ETF (GOVT) has a Sharpe Ratio of 0 with a Treynor Ratio of 0 and a Mean Return of 0. Its Alpha is 0 while GOVT’s R-squared is 0. Furthermore, the fund has a Beta of 0 and a Standard Deviation of 0.

SCHD’s Mean Return is 0.00 points lower than that of GOVT and its R-squared is 0.00 points lower. With a Standard Deviation of 0, SCHD is slightly less volatile than GOVT. The Alpha and Beta of SCHD are 0.00 points lower and 0.00 points lower than GOVT’s Alpha and Beta.

Performance

Annual Returns

SCHD vs. GOVT - Annual Returns

Year SCHD GOVT
2020 15.11% 7.92%
2019 27.28% 6.71%
2018 -5.46% 0.74%
2017 20.88% 2.19%
2016 16.25% 0.92%
2015 -0.21% 0.76%
2014 11.66% 4.99%
2013 32.9% -2.84%
2012 11.4% 0.0%
2011 0.0% 0.0%
2010 0.0% 0.0%

SCHD had its best year in 2013 with an annual return of 32.9%. SCHD’s worst year over the past decade yielded -5.46% and occurred in 2018. In most years the Schwab U.S. Dividend Equity ETF provided moderate returns such as in 2012, 2014, and 2020 where annual returns amounted to 11.4%, 11.66%, and 15.11% respectively.

The year 2020 was the strongest year for GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.

Portfolio Growth

SCHD vs. GOVT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SCHD $10,000 $28,823 14.80%
GOVT $10,000 $12,297 2.67%

A $10,000 investment in SCHD would have resulted in a final balance of $28,823. This is a profit of $18,823 over 8 years and amounts to a compound annual growth rate (CAGR) of 14.80%.

With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.

SCHD’s CAGR is 12.13 percentage points higher than that of GOVT and as a result, would have yielded $16,526 more on a $10,000 investment. Thus, SCHD outperformed GOVT by 12.13% annually.


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