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SCHD vs. MBB: What’s The Difference?

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

SCHD and MBB have the same expense ratio: 0.06%. SCHD also has a high exposure to the financial services sector while MBB is mostly comprised of AAA bonds. Overall, SCHD has provided higher returns than MBB over the past 8 years.

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

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Summary

SCHDMBB
NameSchwab U.S. Dividend Equity ETFiShares MBS ETF
CategoryLarge ValueIntermediate Government
IssuerSchwab ETFsiShares
AUM26B25.69B
Avg. Return14.80%3.08%
Div. Yield2.89%1.88%
Expense Ratio0.06%0.06%

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 MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.

SCHD’s dividend yield is 1.01% higher than that of MBB (2.89% vs. 1.88%). Also, SCHD yielded on average 11.73% more per year over the past decade (14.80% vs. 3.08%). SCHD and MBB have the same expense ratio: 0.06%.

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Fund Composition

Holdings

SCHD - Holdings

SCHD HoldingsWeight
Merck & Co Inc4.24%
The Home Depot Inc4.19%
Texas Instruments Inc4.16%
Broadcom Inc4.15%
Amgen Inc4.11%
PepsiCo Inc4.09%
BlackRock Inc4.05%
Pfizer Inc3.97%
Verizon Communications Inc3.96%
Cisco Systems Inc3.96%

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%.

MBB - Holdings

MBB Bond SectorsWeight
AAA99.51%
Others0.49%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 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

SCHDMBB
Mean Return00.2
R-squared074.38
Std. Deviation02.12
Alpha00.14
Beta00.6
Sharpe Ratio00.87
Treynor Ratio03.02

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

The iShares MBS ETF (MBB) has a Mean Return of 0.2 with a R-squared of 74.38 and a Beta of 0.6. Its Standard Deviation is 2.12 while MBB’s Sharpe Ratio is 0.87. Furthermore, the fund has a Treynor Ratio of 3.02 and a Alpha of 0.14.

SCHD’s Mean Return is 0.20 points lower than that of MBB and its R-squared is 74.38 points lower. With a Standard Deviation of 0, SCHD is slightly less volatile than MBB. The Alpha and Beta of SCHD are 0.14 points lower and 0.60 points lower than MBB’s Alpha and Beta.

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Performance

Annual Returns

SCHD vs. MBB - Annual Returns

YearSCHDMBB
202015.11%4.03%
201927.28%6.27%
2018-5.46%0.81%
201720.88%2.37%
201616.25%1.28%
2015-0.21%1.28%
201411.66%6.16%
201332.9%-1.92%
201211.4%2.23%
20110.0%5.88%
20100.0%5.44%

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 2019 was the strongest year for MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% respectively.

Portfolio Growth

SCHD vs. MBB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
SCHD$10,000$28,82314.80%
MBB$10,000$12,1853.08%

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 MBB, the end total would have been $12,185. This equates to a $2,185 profit over 8 years and a compound annual growth rate (CAGR) of 3.08%.

SCHD’s CAGR is 11.73 percentage points higher than that of MBB and as a result, would have yielded $16,638 more on a $10,000 investment. Thus, SCHD outperformed MBB by 11.73% annually.


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