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SCHP vs. EMB: What’s The Difference?

The Schwab U.S. TIPS ETF (SCHP) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. SCHP is a Schwab ETFs Inflation-Protected Bond fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between SCHP and EMB? And which fund is better?

The expense ratio of SCHP is 0.34 percentage points lower than EMB’s (0.05% vs. 0.39%). SCHP is mostly comprised of AAA bonds and EMB has a high exposure to BBB bond. Overall, SCHP has provided lower returns than EMB over the past 10 years.

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

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Summary

SCHPEMB
NameSchwab U.S. TIPS ETFiShares J.P. Morgan USD Emerging Markets Bond ETF
CategoryInflation-Protected BondEmerging Markets Bond
IssuerSchwab ETFsiShares
AUM18.41B19.76B
Avg. Return3.92%6.43%
Div. Yield1.97%3.85%
Expense Ratio0.05%0.39%

The Schwab U.S. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.

SCHP’s dividend yield is 1.88% lower than that of EMB (1.97% vs. 3.85%). Also, SCHP yielded on average 2.52% less per year over the past decade (3.92% vs. 6.43%). The expense ratio of SCHP is 0.34 percentage points lower than EMB’s (0.05% vs. 0.39%).

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Fund Composition

Holdings

SCHP - Holdings

SCHP Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

SCHP’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.

EMB - Holdings

EMB Bond SectorsWeight
BBB33.79%
B21.97%
BB16.92%
A13.67%
AA7.97%
Below B4.49%
Others1.11%
AAA0.09%
US Government0.0%

EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.

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Risk Analysis

SCHPEMB
Mean Return0.280.44
R-squared66.1623.34
Std. Deviation4.328.44
Alpha-0.50.89
Beta1.171.36
Sharpe Ratio0.640.55
Treynor Ratio2.313.24

The Schwab U.S. TIPS ETF (SCHP) has a Treynor Ratio of 2.31 with a Sharpe Ratio of 0.64 and a Alpha of -0.5. Its R-squared is 66.16 while SCHP’s Mean Return is 0.28. Furthermore, the fund has a Standard Deviation of 4.32 and a Beta of 1.17.

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Alpha of 0.89 with a R-squared of 23.34 and a Beta of 1.36. Its Standard Deviation is 8.44 while EMB’s Treynor Ratio is 3.24. Furthermore, the fund has a Mean Return of 0.44 and a Sharpe Ratio of 0.55.

SCHP’s Mean Return is 0.16 points lower than that of EMB and its R-squared is 42.82 points higher. With a Standard Deviation of 4.32, SCHP is slightly less volatile than EMB. The Alpha and Beta of SCHP are 1.39 points lower and 0.19 points lower than EMB’s Alpha and Beta.

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Performance

Annual Returns

SCHP vs. EMB - Annual Returns

YearSCHPEMB
202010.94%5.48%
20198.36%15.57%
2018-1.31%-5.67%
20172.95%9.98%
20164.6%9.41%
2015-1.5%0.43%
20143.56%6.69%
2013-8.66%-7.42%
20126.83%17.64%
201113.38%7.2%
20100.0%11.47%

SCHP had its best year in 2011 with an annual return of 13.38%. SCHP’s worst year over the past decade yielded -8.66% and occurred in 2013. In most years the Schwab U.S. TIPS ETF provided moderate returns such as in 2017, 2014, and 2016 where annual returns amounted to 2.95%, 3.56%, and 4.6% respectively.

The year 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.

Portfolio Growth

SCHP vs. EMB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
SCHP$10,000$14,4183.92%
EMB$10,000$17,3096.43%

A $10,000 investment in SCHP would have resulted in a final balance of $14,418. This is a profit of $4,418 over 10 years and amounts to a compound annual growth rate (CAGR) of 3.92%.

With a $10,000 investment in EMB, the end total would have been $17,309. This equates to a $7,309 profit over 10 years and a compound annual growth rate (CAGR) of 6.43%.

SCHP’s CAGR is 2.52 percentage points lower than that of EMB and as a result, would have yielded $2,891 less on a $10,000 investment. Thus, SCHP performed worse than EMB by 2.52% annually.


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