TIP vs. SCHA: What’s The Difference?

The iShares TIPS Bond ETF (TIP) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between TIP and SCHA? And which fund is better?

The expense ratio of TIP is 0.15 percentage points higher than SCHA’s (0.19% vs. 0.04%). TIP is mostly comprised of AAA bonds while SCHA has a high exposure to the healthcare sector. Overall, TIP has provided lower returns than SCHA over the past ten years.

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

Summary

TIP SCHA
Name iShares TIPS Bond ETF Schwab U.S. Small-Cap ETF
Category Inflation-Protected Bond Small Blend
Issuer iShares Schwab ETFs
AUM 28.3B 16.51B
Avg. Return 4.07% 12.62%
Div. Yield 1.87% 0.98%
Expense Ratio 0.19% 0.04%

The iShares TIPS Bond ETF (TIP) is a Inflation-Protected Bond fund that is issued by iShares. It currently has 28.3B total assets under management and has yielded an average annual return of 4.07% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.19%.

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%.

TIP’s dividend yield is 0.89% higher than that of SCHA (1.87% vs. 0.98%). Also, TIP yielded on average 8.55% less per year over the past decade (4.07% vs. 12.62%). The expense ratio of TIP is 0.15 percentage points higher than SCHA’s (0.19% vs. 0.04%).

Fund Composition

Holdings

TIP - Holdings

TIP Bond Sectors Weight
AAA 99.31%
Others 0.69%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

TIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.31%, 0.69%, 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%.

Risk Analysis

TIP SCHA
Mean Return 0.28 1.14
R-squared 66.57 82.26
Std. Deviation 4.33 18.68
Alpha -0.58 -4.65
Beta 1.18 1.25
Sharpe Ratio 0.62 0.7
Treynor Ratio 2.24 9.62

The iShares TIPS Bond ETF (TIP) has a Alpha of -0.58 with a Treynor Ratio of 2.24 and a Mean Return of 0.28. Its R-squared is 66.57 while TIP’s Standard Deviation is 4.33. Furthermore, the fund has a Beta of 1.18 and a Sharpe Ratio of 0.62.

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

TIP’s Mean Return is 0.86 points lower than that of SCHA and its R-squared is 15.69 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than SCHA. The Alpha and Beta of TIP are 4.07 points higher and 0.07 points lower than SCHA’s Alpha and Beta.

Performance

Annual Returns

TIP vs. SCHA - Annual Returns

Year TIP SCHA
2020 10.91% 19.35%
2019 8.28% 26.54%
2018 -1.43% -11.75%
2017 2.92% 15.04%
2016 4.56% 19.88%
2015 -1.59% -4.24%
2014 3.49% 6.53%
2013 -8.65% 39.59%
2012 6.8% 18.24%
2011 13.4% -2.95%
2010 6.1% 28.31%

TIP had its best year in 2011 with an annual return of 13.4%. TIP’s worst year over the past decade yielded -8.65% and occurred in 2013. In most years the iShares TIPS Bond ETF provided moderate returns such as in 2014, 2016, and 2010 where annual returns amounted to 3.49%, 4.56%, and 6.1% 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

TIP vs. SCHA - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $14,353 4.07%
SCHA $10,000 $30,035 12.62%

A $10,000 investment in TIP would have resulted in a final balance of $14,353. This is a profit of $4,353 over 10 years and amounts to a compound annual growth rate (CAGR) of 4.07%.

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%.

TIP’s CAGR is 8.55 percentage points lower than that of SCHA and as a result, would have yielded $15,682 less on a $10,000 investment. Thus, TIP performed worse than SCHA by 8.55% annually.


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