The Schwab U.S. Large-Cap ETF (SCHX) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. SCHX is a Schwab ETFs Large Blend fund and SHY is a iShares Short Government fund. So, what’s the difference between SCHX and SHY? And which fund is better?
The expense ratio of SCHX is 0.12 percentage points lower than SHY’s (0.03% vs. 0.15%). SCHX also has a high exposure to the technology sector while SHY is mostly comprised of AAA bonds. Overall, SCHX has provided higher returns than SHY over the past ten years.
In this article, we’ll compare SCHX vs. SHY. We’ll look at annual returns and risk metrics, as well as at their performance and portfolio growth. Moreover, I’ll also discuss SCHX’s and SHY’s industry exposure, fund composition, and holdings and examine how these affect their overall returns.
Summary
| SCHX | SHY | |
| Name | Schwab U.S. Large-Cap ETF | iShares 1-3 Year Treasury Bond ETF |
| Category | Large Blend | Short Government |
| Issuer | Schwab ETFs | iShares |
| AUM | 30.89B | 19.51B |
| Avg. Return | 14.60% | 1.27% |
| Div. Yield | 1.41% | 0.46% |
| Expense Ratio | 0.03% | 0.15% |
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 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.
SCHX’s dividend yield is 0.95% higher than that of SHY (1.41% vs. 0.46%). Also, SCHX yielded on average 13.33% more per year over the past decade (14.60% vs. 1.27%). The expense ratio of SCHX is 0.12 percentage points lower than SHY’s (0.03% vs. 0.15%).
Fund Composition
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%.
| SHY Bond Sectors | Weight |
| AAA | 99.67% |
| Others | 0.33% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 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
| SCHX | SHY | |
| Mean Return | 1.24 | 0.09 |
| R-squared | 99.83 | 39.11 |
| Std. Deviation | 13.8 | 0.89 |
| Alpha | -0.14 | -0.03 |
| Beta | 1.02 | 0.18 |
| Sharpe Ratio | 1.03 | 0.54 |
| Treynor Ratio | 14.06 | 2.6 |
The Schwab U.S. Large-Cap ETF (SCHX) has a Alpha of -0.14 with a Treynor Ratio of 14.06 and a R-squared of 99.83. Its Beta is 1.02 while SCHX’s Mean Return is 1.24. Furthermore, the fund has a Sharpe Ratio of 1.03 and a Standard Deviation of 13.8.
The iShares 1-3 Year Treasury Bond ETF (SHY) has a Standard Deviation of 0.89 with a Mean Return of 0.09 and a R-squared of 39.11. Its Treynor Ratio is 2.6 while SHY’s Beta is 0.18. Furthermore, the fund has a Sharpe Ratio of 0.54 and a Alpha of -0.03.
SCHX’s Mean Return is 1.15 points higher than that of SHY and its R-squared is 60.72 points higher. With a Standard Deviation of 13.8, SCHX is slightly more volatile than SHY. The Alpha and Beta of SCHX are 0.11 points lower and 0.84 points higher than SHY’s Alpha and Beta.
Performance
Annual Returns
| Year | SCHX | SHY |
| 2020 | 20.9% | 3.01% |
| 2019 | 31.4% | 3.42% |
| 2018 | -4.52% | 1.45% |
| 2017 | 21.91% | 0.27% |
| 2016 | 11.78% | 0.75% |
| 2015 | 1.02% | 0.43% |
| 2014 | 13.33% | 0.48% |
| 2013 | 32.54% | 0.23% |
| 2012 | 16.06% | 0.31% |
| 2011 | 1.61% | 1.43% |
| 2010 | 15.88% | 2.23% |
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 SHY, returning 3.42% on an annual basis. The poorest year for SHY in the last ten years was 2013, with a yield of 0.23%. Most years the iShares 1-3 Year Treasury Bond ETF has given investors modest returns, such as in 2014, 2016, and 2011, when gains were 0.48%, 0.75%, and 1.43% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| SCHX | $10,000 | $36,987 | 14.60% |
| SHY | $10,000 | $11,235 | 1.27% |
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 SHY, the end total would have been $11,235. This equates to a $1,235 profit over 10 years and a compound annual growth rate (CAGR) of 1.27%.
SCHX’s CAGR is 13.33 percentage points higher than that of SHY and as a result, would have yielded $25,752 more on a $10,000 investment. Thus, SCHX outperformed SHY by 13.33% annually.
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