The Schwab U.S. TIPS ETF (SCHP) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. SCHP is a Schwab ETFs Inflation-Protected Bond fund and SHY is a iShares Short Government fund. So, what’s the difference between SCHP and SHY? And which fund is better?
The expense ratio of SCHP is 0.10 percentage points lower than SHY’s (0.05% vs. 0.15%). SCHP is mostly comprised of AAA bonds and SHY has a high exposure to AAA bond. Overall, SCHP has provided higher returns than SHY over the past 10 years.
In this article, we’ll compare SCHP vs. SHY. We’ll look at performance and industry exposure, as well as at their annual returns and risk metrics. Moreover, I’ll also discuss SCHP’s and SHY’s portfolio growth, holdings, and fund composition and examine how these affect their overall returns.
|Name||Schwab U.S. TIPS ETF||iShares 1-3 Year Treasury Bond ETF|
|Category||Inflation-Protected Bond||Short 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 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%.
SCHP’s dividend yield is 1.51% higher than that of SHY (1.97% vs. 0.46%). Also, SCHP yielded on average 2.64% more per year over the past decade (3.92% vs. 1.27%). The expense ratio of SCHP is 0.10 percentage points lower than SHY’s (0.05% vs. 0.15%).
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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.
|SHY Bond Sectors||Weight|
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.
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The Schwab U.S. TIPS ETF (SCHP) has a Alpha of -0.5 with a R-squared of 66.16 and a Sharpe Ratio of 0.64. Its Beta is 1.17 while SCHP’s Treynor Ratio is 2.31. Furthermore, the fund has a Mean Return of 0.28 and a Standard Deviation of 4.32.
The iShares 1-3 Year Treasury Bond ETF (SHY) has a R-squared of 39.11 with a Alpha of -0.03 and a Beta of 0.18. Its Sharpe Ratio is 0.54 while SHY’s Mean Return is 0.09. Furthermore, the fund has a Standard Deviation of 0.89 and a Treynor Ratio of 2.6.
SCHP’s Mean Return is 0.19 points higher than that of SHY and its R-squared is 27.05 points higher. With a Standard Deviation of 4.32, SCHP is slightly more volatile than SHY. The Alpha and Beta of SCHP are 0.47 points lower and 0.99 points higher than SHY’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 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.
|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 SHY, the end total would have been $11,235. This equates to a $1,235 profit over 10 years and a compound annual growth rate (CAGR) of 1.27%.
SCHP’s CAGR is 2.64 percentage points higher than that of SHY and as a result, would have yielded $3,183 more on a $10,000 investment. Thus, SCHP outperformed SHY by 2.64% annually.
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