SCHX vs. HYG: What’s The Difference?

The Schwab U.S. Large-Cap ETF (SCHX) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. SCHX is a Schwab ETFs Large Blend fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between SCHX and HYG? And which fund is better?

The expense ratio of SCHX is 0.45 percentage points lower than HYG’s (0.03% vs. 0.48%). SCHX also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, SCHX has provided higher returns than HYG over the past ten years.

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

Summary

SCHX HYG
Name Schwab U.S. Large-Cap ETF iShares iBoxx $ High Yield Corporate Bond ETF
Category Large Blend High Yield Bond
Issuer Schwab ETFs iShares
AUM 30.89B 20.03B
Avg. Return 14.60% 6.42%
Div. Yield 1.41% 4.44%
Expense Ratio 0.03% 0.48%

The Schwab U.S. Large-Cap ETF (SCHX) is a Large Blend fund that is issued by Schwab ETFs. It currently has 30.89B total assets under management and has yielded an average annual return of 14.60% over the past 10 years. The fund has a dividend yield of 1.41% with an expense ratio of 0.03%.

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is a High Yield Bond fund that is issued by iShares. It currently has 20.03B total assets under management and has yielded an average annual return of 6.42% over the past 10 years. The fund has a dividend yield of 4.44% with an expense ratio of 0.48%.

SCHX’s dividend yield is 3.03% lower than that of HYG (1.41% vs. 4.44%). Also, SCHX yielded on average 8.19% more per year over the past decade (14.60% vs. 6.42%). The expense ratio of SCHX is 0.45 percentage points lower than HYG’s (0.03% vs. 0.48%).

Fund Composition

Holdings

SCHX - Holdings

SCHX Holdings Weight
Apple Inc 5.37%
Microsoft Corp 5.1%
Amazon.com Inc 3.69%
Facebook Inc A 2.08%
Alphabet Inc A 1.84%
Alphabet Inc Class C 1.78%
Berkshire Hathaway Inc Class B 1.32%
Tesla Inc 1.31%
NVIDIA Corp 1.25%
JPMorgan Chase & Co 1.18%

SCHX’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 5.37%, 5.1%, 3.69%, 2.08%, and 1.84%.

Alphabet Inc Class C (1.78%), Berkshire Hathaway Inc Class B (1.32%), and Tesla Inc (1.31%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHX’s holdings at 1.25% and 1.18%.

HYG - Holdings

HYG Bond Sectors Weight
BB 56.53%
B 31.27%
Below B 11.4%
BBB 0.61%
AAA 0.28%
A 0.0%
AA 0.0%
US Government 0.0%
Others -0.09%

HYG’s Top Bond Sectors are ratings of BB, B, Below B, BBB, and AAA at 56.53%, 31.27%, 11.4%, 0.61%, and 0.28%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.

Risk Analysis

SCHX HYG
Mean Return 1.24 0.46
R-squared 99.83 4.1
Std. Deviation 13.8 6.96
Alpha -0.14 3.58
Beta 1.02 0.48
Sharpe Ratio 1.03 0.7
Treynor Ratio 14.06 10.01

The Schwab U.S. Large-Cap ETF (SCHX) has a R-squared of 99.83 with a Standard Deviation of 13.8 and a Alpha of -0.14. Its Beta is 1.02 while SCHX’s Sharpe Ratio is 1.03. Furthermore, the fund has a Treynor Ratio of 14.06 and a Mean Return of 1.24.

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Treynor Ratio of 10.01 with a Alpha of 3.58 and a Mean Return of 0.46. Its Standard Deviation is 6.96 while HYG’s Beta is 0.48. Furthermore, the fund has a Sharpe Ratio of 0.7 and a R-squared of 4.1.

SCHX’s Mean Return is 0.78 points higher than that of HYG and its R-squared is 95.73 points higher. With a Standard Deviation of 13.8, SCHX is slightly more volatile than HYG. The Alpha and Beta of SCHX are 3.72 points lower and 0.54 points higher than HYG’s Alpha and Beta.

Performance

Annual Returns

SCHX vs. HYG - Annual Returns

Year SCHX HYG
2020 20.9% 4.12%
2019 31.4% 14.23%
2018 -4.52% -1.93%
2017 21.91% 6.09%
2016 11.78% 13.92%
2015 1.02% -5.55%
2014 13.33% 2.0%
2013 32.54% 5.9%
2012 16.06% 13.83%
2011 1.61% 5.89%
2010 15.88% 12.07%

SCHX had its best year in 2013 with an annual return of 32.54%. SCHX’s worst year over the past decade yielded -4.52% and occurred in 2018. In most years the Schwab U.S. Large-Cap ETF provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.33%, 15.88%, and 16.06% respectively.

The year 2019 was the strongest year for HYG, returning 14.23% on an annual basis. The poorest year for HYG in the last ten years was 2015, with a yield of -5.55%. Most years the iShares iBoxx $ High Yield Corporate Bond ETF has given investors modest returns, such as in 2011, 2013, and 2017, when gains were 5.89%, 5.9%, and 6.09% respectively.

Portfolio Growth

SCHX vs. HYG - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SCHX $10,000 $36,987 14.60%
HYG $10,000 $17,335 6.42%

A $10,000 investment in SCHX would have resulted in a final balance of $36,987. This is a profit of $26,987 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.60%.

With a $10,000 investment in HYG, the end total would have been $17,335. This equates to a $7,335 profit over 10 years and a compound annual growth rate (CAGR) of 6.42%.

SCHX’s CAGR is 8.19 percentage points higher than that of HYG and as a result, would have yielded $19,652 more on a $10,000 investment. Thus, SCHX outperformed HYG by 8.19% annually.


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