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SCHX vs. MBB: What’s The Difference?

The Schwab U.S. Large-Cap ETF (SCHX) and the iShares MBS ETF (MBB) are both among the Top 100 ETFs. SCHX is a Schwab ETFs Large Blend fund and MBB is a iShares Intermediate Government fund. So, what’s the difference between SCHX and MBB? And which fund is better?

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

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

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Summary

SCHXMBB
NameSchwab U.S. Large-Cap ETFiShares MBS ETF
CategoryLarge BlendIntermediate Government
IssuerSchwab ETFsiShares
AUM30.89B25.69B
Avg. Return14.60%3.08%
Div. Yield1.41%1.88%
Expense Ratio0.03%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 MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.

SCHX’s dividend yield is 0.47% lower than that of MBB (1.41% vs. 1.88%). Also, SCHX yielded on average 11.53% more per year over the past decade (14.60% vs. 3.08%). The expense ratio of SCHX is 0.03 percentage points lower than MBB’s (0.03% vs. 0.06%).

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Fund Composition

Holdings

SCHX - Holdings

SCHX HoldingsWeight
Apple Inc5.37%
Microsoft Corp5.1%
Amazon.com Inc3.69%
Facebook Inc A2.08%
Alphabet Inc A1.84%
Alphabet Inc Class C1.78%
Berkshire Hathaway Inc Class B1.32%
Tesla Inc1.31%
NVIDIA Corp1.25%
JPMorgan Chase & Co1.18%

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%.

MBB - Holdings

MBB Bond SectorsWeight
AAA99.51%
Others0.49%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 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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Risk Analysis

SCHXMBB
Mean Return1.240.2
R-squared99.8374.38
Std. Deviation13.82.12
Alpha-0.140.14
Beta1.020.6
Sharpe Ratio1.030.87
Treynor Ratio14.063.02

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

The iShares MBS ETF (MBB) has a Treynor Ratio of 3.02 with a Beta of 0.6 and a Alpha of 0.14. Its Mean Return is 0.2 while MBB’s R-squared is 74.38. Furthermore, the fund has a Sharpe Ratio of 0.87 and a Standard Deviation of 2.12.

SCHX’s Mean Return is 1.04 points higher than that of MBB and its R-squared is 25.45 points higher. With a Standard Deviation of 13.8, SCHX is slightly more volatile than MBB. The Alpha and Beta of SCHX are 0.28 points lower and 0.42 points higher than MBB’s Alpha and Beta.

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Performance

Annual Returns

SCHX vs. MBB - Annual Returns

YearSCHXMBB
202020.9%4.03%
201931.4%6.27%
2018-4.52%0.81%
201721.91%2.37%
201611.78%1.28%
20151.02%1.28%
201413.33%6.16%
201332.54%-1.92%
201216.06%2.23%
20111.61%5.88%
201015.88%5.44%

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 MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% respectively.

Portfolio Growth

SCHX vs. MBB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
SCHX$10,000$36,98714.60%
MBB$10,000$13,1893.08%

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 MBB, the end total would have been $13,189. This equates to a $3,189 profit over 10 years and a compound annual growth rate (CAGR) of 3.08%.

SCHX’s CAGR is 11.53 percentage points higher than that of MBB and as a result, would have yielded $23,798 more on a $10,000 investment. Thus, SCHX outperformed MBB by 11.53% annually.


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