The Schwab U.S. Large-Cap ETF (SCHX) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. SCHX is a Schwab ETFs Large Blend fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between SCHX and VMBS? And which fund is better?
The expense ratio of SCHX is 0.02 percentage points lower than VMBS’s (0.03% vs. 0.05%). SCHX also has a high exposure to the technology sector while VMBS is mostly comprised of AAA bonds. Overall, SCHX has provided higher returns than VMBS over the past ten years.
In this article, we’ll compare SCHX vs. VMBS. We’ll look at portfolio growth and holdings, as well as at their risk metrics and industry exposure. Moreover, I’ll also discuss SCHX’s and VMBS’s performance, fund composition, and annual returns and examine how these affect their overall returns.
|Name||Schwab U.S. Large-Cap ETF||Vanguard Mortgage-Backed Securities Index Fund ETF Shares|
|Category||Large Blend||Intermediate Government|
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 Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) is a Intermediate Government fund that is issued by Vanguard. It currently has 16.61B total assets under management and has yielded an average annual return of 2.89% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.05%.
SCHX’s dividend yield is 0.18% higher than that of VMBS (1.41% vs. 1.23%). Also, SCHX yielded on average 11.71% more per year over the past decade (14.60% vs. 2.89%). The expense ratio of SCHX is 0.02 percentage points lower than VMBS’s (0.03% vs. 0.05%).
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|Facebook Inc A||2.08%|
|Alphabet Inc A||1.84%|
|Alphabet Inc Class C||1.78%|
|Berkshire Hathaway Inc Class B||1.32%|
|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%.
|VMBS Bond Sectors||Weight|
VMBS’s Top Bond Sectors are ratings of AAA, Below B, B, BB, and BBB at 100.01%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.
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The Schwab U.S. Large-Cap ETF (SCHX) has a R-squared of 99.83 with a Standard Deviation of 13.8 and a Sharpe Ratio of 1.03. Its Treynor Ratio is 14.06 while SCHX’s Mean Return is 1.24. Furthermore, the fund has a Alpha of -0.14 and a Beta of 1.02.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a R-squared of 65.78 with a Sharpe Ratio of 0.94 and a Standard Deviation of 2.02. Its Mean Return is 0.21 while VMBS’s Treynor Ratio is 3.47. Furthermore, the fund has a Beta of 0.54 and a Alpha of 0.37.
SCHX’s Mean Return is 1.03 points higher than that of VMBS and its R-squared is 34.05 points higher. With a Standard Deviation of 13.8, SCHX is slightly more volatile than VMBS. The Alpha and Beta of SCHX are 0.51 points lower and 0.48 points higher than VMBS’s Alpha and Beta.
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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 VMBS, returning 6.17% on an annual basis. The poorest year for VMBS in the last ten years was 2013, with a yield of -1.28%. Most years the Vanguard Mortgage-Backed Securities Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 2.37%, 2.47%, and 3.77% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 VMBS, the end total would have been $13,265. This equates to a $3,265 profit over 10 years and a compound annual growth rate (CAGR) of 2.89%.
SCHX’s CAGR is 11.71 percentage points higher than that of VMBS and as a result, would have yielded $23,722 more on a $10,000 investment. Thus, SCHX outperformed VMBS by 11.71% annually.
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