SCHP vs. VHT: What’s The Difference?

The Schwab U.S. TIPS ETF (SCHP) and the Vanguard Health Care Index Fund ETF Shares (VHT) are both among the Top 100 ETFs. SCHP is a Schwab ETFs Inflation-Protected Bond fund and VHT is a Vanguard Health fund. So, what’s the difference between SCHP and VHT? And which fund is better?

The expense ratio of SCHP is 0.05 percentage points lower than VHT’s (0.05% vs. 0.1%). SCHP is mostly comprised of AAA bonds while VHT has a high exposure to the healthcare sector. Overall, SCHP has provided lower returns than VHT over the past 10 years.

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

Summary

SCHP VHT
Name Schwab U.S. TIPS ETF Vanguard Health Care Index Fund ETF Shares
Category Inflation-Protected Bond Health
Issuer Schwab ETFs Vanguard
AUM 18.41B 17.94B
Avg. Return 3.92% 16.04%
Div. Yield 1.97% 1.15%
Expense Ratio 0.05% 0.1%

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 Vanguard Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.

SCHP’s dividend yield is 0.82% higher than that of VHT (1.97% vs. 1.15%). Also, SCHP yielded on average 12.12% less per year over the past decade (3.92% vs. 16.04%). The expense ratio of SCHP is 0.05 percentage points lower than VHT’s (0.05% vs. 0.1%).

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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.

VHT - Holdings

VHT Holdings Weight
Johnson & Johnson 7.34%
UnitedHealth Group Inc 6.44%
Pfizer Inc 3.7%
Abbott Laboratories 3.48%
Thermo Fisher Scientific Inc 3.37%
AbbVie Inc 3.37%
Merck & Co Inc 3.33%
Eli Lilly and Co 3.17%
Danaher Corp 2.91%
Medtronic PLC 2.83%

VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.

AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.

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Risk Analysis

SCHP VHT
Mean Return 0.28 1.33
R-squared 66.16 59.86
Std. Deviation 4.32 13.58
Alpha -0.5 7.99
Beta 1.17 0.75
Sharpe Ratio 0.64 1.13
Treynor Ratio 2.31 20.74

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

The Vanguard Health Care Index Fund ETF Shares (VHT) has a Standard Deviation of 13.58 with a Treynor Ratio of 20.74 and a R-squared of 59.86. Its Sharpe Ratio is 1.13 while VHT’s Alpha is 7.99. Furthermore, the fund has a Beta of 0.75 and a Mean Return of 1.33.

SCHP’s Mean Return is 1.05 points lower than that of VHT and its R-squared is 6.30 points higher. With a Standard Deviation of 4.32, SCHP is slightly less volatile than VHT. The Alpha and Beta of SCHP are 8.49 points lower and 0.42 points higher than VHT’s Alpha and Beta.

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Performance

Annual Returns

SCHP vs. VHT - Annual Returns

Year SCHP VHT
2020 10.94% 18.21%
2019 8.36% 21.97%
2018 -1.31% 5.55%
2017 2.95% 23.34%
2016 4.6% -3.33%
2015 -1.5% 7.22%
2014 3.56% 25.38%
2013 -8.66% 42.67%
2012 6.83% 19.1%
2011 13.38% 10.57%
2010 0.0% 5.75%

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 2013 was the strongest year for VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.

Portfolio Growth

SCHP vs. VHT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SCHP $10,000 $14,418 3.92%
VHT $10,000 $45,829 16.04%

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 VHT, the end total would have been $45,829. This equates to a $35,829 profit over 10 years and a compound annual growth rate (CAGR) of 16.04%.

SCHP’s CAGR is 12.12 percentage points lower than that of VHT and as a result, would have yielded $31,411 less on a $10,000 investment. Thus, SCHP performed worse than VHT by 12.12% annually.


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