The Schwab U.S. TIPS ETF (SCHP) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. SCHP is a Schwab ETFs Inflation-Protected Bond fund and IEF is a iShares Long Government fund. So, what’s the difference between SCHP and IEF? And which fund is better?
The expense ratio of SCHP is 0.10 percentage points lower than IEF’s (0.05% vs. 0.15%). SCHP is mostly comprised of AAA bonds and IEF has a high exposure to AAA bond. Overall, SCHP has provided lower returns than IEF over the past 10 years.
In this article, we’ll compare SCHP vs. IEF. We’ll look at risk metrics and fund composition, as well as at their annual returns and performance. Moreover, I’ll also discuss SCHP’s and IEF’s portfolio growth, holdings, and industry exposure and examine how these affect their overall returns.
|Name||Schwab U.S. TIPS ETF||iShares 7-10 Year Treasury Bond ETF|
|Category||Inflation-Protected Bond||Long 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 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
SCHP’s dividend yield is 1.13% higher than that of IEF (1.97% vs. 0.84%). Also, SCHP yielded on average 1.15% less per year over the past decade (3.92% vs. 5.06%). The expense ratio of SCHP is 0.10 percentage points lower than IEF’s (0.05% vs. 0.15%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
|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.
|IEF Bond Sectors||Weight|
IEF’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.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The Schwab U.S. TIPS ETF (SCHP) has a R-squared of 66.16 with a Mean Return of 0.28 and a Beta of 1.17. Its Alpha is -0.5 while SCHP’s Treynor Ratio is 2.31. Furthermore, the fund has a Sharpe Ratio of 0.64 and a Standard Deviation of 4.32.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Treynor Ratio of 1.97 with a Mean Return of 0.32 and a Standard Deviation of 5.42. Its Beta is 1.59 while IEF’s R-squared is 77.56. Furthermore, the fund has a Alpha of -1.2 and a Sharpe Ratio of 0.6.
SCHP’s Mean Return is 0.04 points lower than that of IEF and its R-squared is 11.40 points lower. With a Standard Deviation of 4.32, SCHP is slightly less volatile than IEF. The Alpha and Beta of SCHP are 0.70 points higher and 0.42 points lower than IEF’s Alpha and Beta.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
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 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 IEF, the end total would have been $15,497. This equates to a $5,497 profit over 10 years and a compound annual growth rate (CAGR) of 5.06%.
SCHP’s CAGR is 1.15 percentage points lower than that of IEF and as a result, would have yielded $1,079 less on a $10,000 investment. Thus, SCHP performed worse than IEF by 1.15% annually.
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.