Skip to content

SCHD vs. SHY: What’s The Difference?

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

The expense ratio of SCHD is 0.09 percentage points lower than SHY’s (0.06% vs. 0.15%). SCHD also has a high exposure to the financial services sector while SHY is mostly comprised of AAA bonds. Overall, SCHD has provided higher returns than SHY over the past 8 years.

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

Summary

SCHDSHY
NameSchwab U.S. Dividend Equity ETFiShares 1-3 Year Treasury Bond ETF
CategoryLarge ValueShort Government
IssuerSchwab ETFsiShares
AUM26B19.51B
Avg. Return14.80%1.27%
Div. Yield2.89%0.46%
Expense Ratio0.06%0.15%

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 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%.

SCHD’s dividend yield is 2.43% higher than that of SHY (2.89% vs. 0.46%). Also, SCHD yielded on average 13.53% more per year over the past decade (14.80% vs. 1.27%). The expense ratio of SCHD is 0.09 percentage points lower than SHY’s (0.06% vs. 0.15%).

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%.

SHY - Holdings

SHY Bond SectorsWeight
AAA99.67%
Others0.33%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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.

Risk Analysis

SCHDSHY
Mean Return00.09
R-squared039.11
Std. Deviation00.89
Alpha0-0.03
Beta00.18
Sharpe Ratio00.54
Treynor Ratio02.6

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

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

SCHD’s Mean Return is 0.09 points lower than that of SHY and its R-squared is 39.11 points lower. With a Standard Deviation of 0, SCHD is slightly less volatile than SHY. The Alpha and Beta of SCHD are 0.03 points higher and 0.18 points lower than SHY’s Alpha and Beta.

Performance

Annual Returns

SCHD vs. SHY - Annual Returns

YearSCHDSHY
202015.11%3.01%
201927.28%3.42%
2018-5.46%1.45%
201720.88%0.27%
201616.25%0.75%
2015-0.21%0.43%
201411.66%0.48%
201332.9%0.23%
201211.4%0.31%
20110.0%1.43%
20100.0%2.23%

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 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

SCHD vs. SHY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
SCHD$10,000$28,82314.80%
SHY$10,000$11,0431.27%

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 SHY, the end total would have been $11,043. This equates to a $1,043 profit over 8 years and a compound annual growth rate (CAGR) of 1.27%.

SCHD’s CAGR is 13.53 percentage points higher than that of SHY and as a result, would have yielded $17,780 more on a $10,000 investment. Thus, SCHD outperformed SHY by 13.53% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!

2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.

5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Marvin Allen

Leave a Reply

Your email address will not be published. Required fields are marked *