SCHX vs. IGSB: What’s The Difference?

The Schwab U.S. Large-Cap ETF (SCHX) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. SCHX is a Schwab ETFs Large Blend fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between SCHX and IGSB? And which fund is better?

The expense ratio of SCHX is 0.03 percentage points lower than IGSB’s (0.03% vs. 0.06%). SCHX also has a high exposure to the technology sector while IGSB is mostly comprised of BBB bonds. Overall, SCHX has provided higher returns than IGSB over the past ten years.

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

Summary

SCHX IGSB
Name Schwab U.S. Large-Cap ETF iShares 1-5 Year Investment Grade Corporate Bond ETF
Category Large Blend Short-Term Bond
Issuer Schwab ETFs iShares
AUM 30.89B 26.63B
Avg. Return 14.60% 2.51%
Div. Yield 1.41% 2.02%
Expense Ratio 0.03% 0.06%

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 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.

SCHX’s dividend yield is 0.61% lower than that of IGSB (1.41% vs. 2.02%). Also, SCHX yielded on average 12.10% more per year over the past decade (14.60% vs. 2.51%). The expense ratio of SCHX is 0.03 percentage points lower than IGSB’s (0.03% vs. 0.06%).

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%.

IGSB - Holdings

IGSB Bond Sectors Weight
BBB 50.48%
A 40.04%
AA 7.46%
AAA 2.21%
BB 0.09%
Below B 0.0%
B 0.0%
US Government 0.0%
Others -0.28%

IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.

Risk Analysis

SCHX IGSB
Mean Return 1.24 0.19
R-squared 99.83 26.13
Std. Deviation 13.8 2
Alpha -0.14 0.69
Beta 1.02 0.34
Sharpe Ratio 1.03 0.82
Treynor Ratio 14.06 4.82

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

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Treynor Ratio of 4.82 with a Alpha of 0.69 and a Sharpe Ratio of 0.82. Its Standard Deviation is 2 while IGSB’s R-squared is 26.13. Furthermore, the fund has a Beta of 0.34 and a Mean Return of 0.19.

SCHX’s Mean Return is 1.05 points higher than that of IGSB and its R-squared is 73.70 points higher. With a Standard Deviation of 13.8, SCHX is slightly more volatile than IGSB. The Alpha and Beta of SCHX are 0.83 points lower and 0.68 points higher than IGSB’s Alpha and Beta.

Performance

Annual Returns

SCHX vs. IGSB - Annual Returns

Year SCHX IGSB
2020 20.9% 5.26%
2019 31.4% 7.01%
2018 -4.52% 1.34%
2017 21.91% 1.41%
2016 11.78% 1.77%
2015 1.02% 0.7%
2014 13.33% 0.74%
2013 32.54% 1.03%
2012 16.06% 3.28%
2011 1.61% 1.34%
2010 15.88% 3.69%

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 IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% respectively.

Portfolio Growth

SCHX vs. IGSB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SCHX $10,000 $36,987 14.60%
IGSB $10,000 $12,637 2.51%

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 IGSB, the end total would have been $12,637. This equates to a $2,637 profit over 10 years and a compound annual growth rate (CAGR) of 2.51%.

SCHX’s CAGR is 12.10 percentage points higher than that of IGSB and as a result, would have yielded $24,350 more on a $10,000 investment. Thus, SCHX outperformed IGSB by 12.10% annually.


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