The Schwab U.S. TIPS ETF (SCHP) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. SCHP is a Schwab ETFs Inflation-Protected Bond fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between SCHP and GOVT? And which fund is better?
SCHP and GOVT have the same expense ratio: 0.05%. SCHP is mostly comprised of AAA bonds and GOVT has a high exposure to AAA bond. Overall, SCHP has provided higher returns than GOVT over the past 8 years.
In this article, we’ll compare SCHP vs. GOVT. We’ll look at portfolio growth and risk metrics, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss SCHP’s and GOVT’s fund composition, performance, and holdings and examine how these affect their overall returns.
|Name||Schwab U.S. TIPS ETF||iShares U.S. Treasury Bond ETF|
|Category||Inflation-Protected Bond||Intermediate Government|
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 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%.
SCHP’s dividend yield is 0.97% higher than that of GOVT (1.97% vs. 1.0%). Also, SCHP yielded on average 1.24% more per year over the past decade (3.92% vs. 2.67%). SCHP and GOVT have the same expense ratio: 0.05%.
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|SCHP Bond Sectors||Weight|
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.
|GOVT Bond Sectors||Weight|
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.
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The Schwab U.S. TIPS ETF (SCHP) has a R-squared of 66.16 with a Treynor Ratio of 2.31 and a Sharpe Ratio of 0.64. Its Beta is 1.17 while SCHP’s Standard Deviation is 4.32. Furthermore, the fund has a Alpha of -0.5 and a Mean Return of 0.28.
The iShares U.S. Treasury Bond ETF (GOVT) has a R-squared of 0 with a Beta of 0 and a Mean Return of 0. Its Treynor Ratio is 0 while GOVT’s Alpha is 0. Furthermore, the fund has a Standard Deviation of 0 and a Sharpe Ratio of 0.
SCHP’s Mean Return is 0.28 points higher than that of GOVT and its R-squared is 66.16 points higher. With a Standard Deviation of 4.32, SCHP is slightly more volatile than GOVT. The Alpha and Beta of SCHP are 0.50 points lower and 1.17 points higher than GOVT’s Alpha and Beta.
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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 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in SCHP would have resulted in a final balance of $11,903. This is a profit of $1,903 over 8 years and amounts to a compound annual growth rate (CAGR) of 3.92%.
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%.
SCHP’s CAGR is 1.24 percentage points higher than that of GOVT and as a result, would have yielded $394 less on a $10,000 investment. Thus, SCHP outperformed GOVT by 1.24% annually.
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