SCHP vs. TLT: What’s The Difference?

The Schwab U.S. TIPS ETF (SCHP) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. SCHP is a Schwab ETFs Inflation-Protected Bond fund and TLT is a iShares Long Government fund. So, what’s the difference between SCHP and TLT? And which fund is better?

The expense ratio of SCHP is 0.10 percentage points lower than TLT’s (0.05% vs. 0.15%). SCHP is mostly comprised of AAA bonds and TLT has a high exposure to AAA bond. Overall, SCHP has provided lower returns than TLT over the past 10 years.

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

Summary

SCHP TLT
Name Schwab U.S. TIPS ETF iShares 20+ Year Treasury Bond ETF
Category Inflation-Protected Bond Long Government
Issuer Schwab ETFs iShares
AUM 18.41B 15.15B
Avg. Return 3.92% 9.00%
Div. Yield 1.97% 1.5%
Expense Ratio 0.05% 0.15%

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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

SCHP’s dividend yield is 0.47% higher than that of TLT (1.97% vs. 1.5%). Also, SCHP yielded on average 5.08% less per year over the past decade (3.92% vs. 9.00%). The expense ratio of SCHP is 0.10 percentage points lower than TLT’s (0.05% vs. 0.15%).

Fund Composition

Holdings

SCHP - Holdings

SCHP Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

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.

TLT - Holdings

TLT Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

TLT’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.

Risk Analysis

SCHP TLT
Mean Return 0.28 0.63
R-squared 66.16 68.76
Std. Deviation 4.32 12.76
Alpha -0.5 -2.83
Beta 1.17 3.54
Sharpe Ratio 0.64 0.55
Treynor Ratio 2.31 1.82

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

The iShares 20+ Year Treasury Bond ETF (TLT) has a R-squared of 68.76 with a Alpha of -2.83 and a Sharpe Ratio of 0.55. Its Mean Return is 0.63 while TLT’s Standard Deviation is 12.76. Furthermore, the fund has a Beta of 3.54 and a Treynor Ratio of 1.82.

SCHP’s Mean Return is 0.35 points lower than that of TLT and its R-squared is 2.60 points lower. With a Standard Deviation of 4.32, SCHP is slightly less volatile than TLT. The Alpha and Beta of SCHP are 2.33 points higher and 2.37 points lower than TLT’s Alpha and Beta.

Performance

Annual Returns

SCHP vs. TLT - Annual Returns

Year SCHP TLT
2020 10.94% 17.92%
2019 8.36% 14.93%
2018 -1.31% -2.07%
2017 2.95% 8.92%
2016 4.6% 1.36%
2015 -1.5% -1.65%
2014 3.56% 27.35%
2013 -8.66% -13.91%
2012 6.83% 3.25%
2011 13.38% 33.6%
2010 0.0% 9.25%

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 TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.

Portfolio Growth

SCHP vs. TLT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SCHP $10,000 $14,418 3.92%
TLT $10,000 $21,793 9.00%

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 TLT, the end total would have been $21,793. This equates to a $11,793 profit over 10 years and a compound annual growth rate (CAGR) of 9.00%.

SCHP’s CAGR is 5.08 percentage points lower than that of TLT and as a result, would have yielded $7,375 less on a $10,000 investment. Thus, SCHP performed worse than TLT by 5.08% annually.


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