SHY vs. SCHA: What’s The Difference?

The iShares 1-3 Year Treasury Bond ETF (SHY) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. SHY is a iShares Short Government fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between SHY and SCHA? And which fund is better?

The expense ratio of SHY is 0.11 percentage points higher than SCHA’s (0.15% vs. 0.04%). SHY is mostly comprised of AAA bonds while SCHA has a high exposure to the healthcare sector. Overall, SHY has provided lower returns than SCHA over the past 10 years.

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

Summary

SHY SCHA
Name iShares 1-3 Year Treasury Bond ETF Schwab U.S. Small-Cap ETF
Category Short Government Small Blend
Issuer iShares Schwab ETFs
AUM 19.51B 16.51B
Avg. Return 1.27% 12.62%
Div. Yield 0.46% 0.98%
Expense Ratio 0.15% 0.04%

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%.

The Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.

SHY’s dividend yield is 0.52% lower than that of SCHA (0.46% vs. 0.98%). Also, SHY yielded on average 11.35% less per year over the past decade (1.27% vs. 12.62%). The expense ratio of SHY is 0.11 percentage points higher than SCHA’s (0.15% vs. 0.04%).

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Fund Composition

Holdings

SHY - Holdings

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.

SCHA - Holdings

SCHA Holdings Weight
AMC Entertainment Holdings Inc Class A 0.67%
Caesars Entertainment Inc 0.51%
Cloudflare Inc 0.48%
NovoCure Ltd 0.45%
Plug Power Inc 0.41%
10x Genomics Inc Ordinary Shares – Class A 0.34%
GameStop Corp Class A 0.28%
RH 0.27%
Penn National Gaming Inc 0.27%
Axon Enterprise Inc 0.27%

SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.

10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.

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Risk Analysis

SHY SCHA
Mean Return 0.09 1.14
R-squared 39.11 82.26
Std. Deviation 0.89 18.68
Alpha -0.03 -4.65
Beta 0.18 1.25
Sharpe Ratio 0.54 0.7
Treynor Ratio 2.6 9.62

The iShares 1-3 Year Treasury Bond ETF (SHY) has a R-squared of 39.11 with a Treynor Ratio of 2.6 and a Beta of 0.18. Its Standard Deviation is 0.89 while SHY’s Sharpe Ratio is 0.54. Furthermore, the fund has a Mean Return of 0.09 and a Alpha of -0.03.

The Schwab U.S. Small-Cap ETF (SCHA) has a Treynor Ratio of 9.62 with a Beta of 1.25 and a Standard Deviation of 18.68. Its Mean Return is 1.14 while SCHA’s Sharpe Ratio is 0.7. Furthermore, the fund has a Alpha of -4.65 and a R-squared of 82.26.

SHY’s Mean Return is 1.05 points lower than that of SCHA and its R-squared is 43.15 points lower. With a Standard Deviation of 0.89, SHY is slightly less volatile than SCHA. The Alpha and Beta of SHY are 4.62 points higher and 1.07 points lower than SCHA’s Alpha and Beta.

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Performance

Annual Returns

SHY vs. SCHA - Annual Returns

Year SHY SCHA
2020 3.01% 19.35%
2019 3.42% 26.54%
2018 1.45% -11.75%
2017 0.27% 15.04%
2016 0.75% 19.88%
2015 0.43% -4.24%
2014 0.48% 6.53%
2013 0.23% 39.59%
2012 0.31% 18.24%
2011 1.43% -2.95%
2010 2.23% 28.31%

SHY had its best year in 2019 with an annual return of 3.42%. SHY’s worst year over the past decade yielded 0.23% and occurred in 2013. In most years the iShares 1-3 Year Treasury Bond ETF provided moderate returns such as in 2014, 2016, and 2011 where annual returns amounted to 0.48%, 0.75%, and 1.43% respectively.

The year 2013 was the strongest year for SCHA, returning 39.59% on an annual basis. The poorest year for SCHA in the last ten years was 2018, with a yield of -11.75%. Most years the Schwab U.S. Small-Cap ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 15.04%, 18.24%, and 19.35% respectively.

Portfolio Growth

SHY vs. SCHA - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SHY $10,000 $11,235 1.27%
SCHA $10,000 $30,035 12.62%

A $10,000 investment in SHY would have resulted in a final balance of $11,235. This is a profit of $1,235 over 10 years and amounts to a compound annual growth rate (CAGR) of 1.27%.

With a $10,000 investment in SCHA, the end total would have been $30,035. This equates to a $20,035 profit over 10 years and a compound annual growth rate (CAGR) of 12.62%.

SHY’s CAGR is 11.35 percentage points lower than that of SCHA and as a result, would have yielded $18,800 less on a $10,000 investment. Thus, SHY performed worse than SCHA by 11.35% annually.


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