TIP vs. SCHF: What’s The Difference?

The iShares TIPS Bond ETF (TIP) and the Schwab International Equity ETF (SCHF) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and SCHF is a Schwab ETFs Foreign Large Blend fund. So, what’s the difference between TIP and SCHF? And which fund is better?

The expense ratio of TIP is 0.13 percentage points higher than SCHF’s (0.19% vs. 0.06%). TIP is mostly comprised of AAA bonds while SCHF has a high exposure to the financial services sector. Overall, TIP has provided lower returns than SCHF over the past ten years.

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

Summary

TIP SCHF
Name iShares TIPS Bond ETF Schwab International Equity ETF
Category Inflation-Protected Bond Foreign Large Blend
Issuer iShares Schwab ETFs
AUM 28.3B 26.99B
Avg. Return 4.07% 6.43%
Div. Yield 1.87% 2.16%
Expense Ratio 0.19% 0.06%

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 International Equity ETF (SCHF) is a Foreign Large Blend fund that is issued by Schwab ETFs. It currently has 26.99B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 2.16% with an expense ratio of 0.06%.

TIP’s dividend yield is 0.29% lower than that of SCHF (1.87% vs. 2.16%). Also, TIP yielded on average 2.36% less per year over the past decade (4.07% vs. 6.43%). The expense ratio of TIP is 0.13 percentage points higher than SCHF’s (0.19% vs. 0.06%).

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.

SCHF - Holdings

SCHF Holdings Weight
Nestle SA 1.66%
Samsung Electronics Co Ltd 1.6%
ASML Holding NV 1.29%
Roche Holding AG 1.24%
Toyota Motor Corp 1.02%
LVMH Moet Hennessy Louis Vuitton SE 0.93%
Novartis AG 0.92%
Shopify Inc A 0.78%
AstraZeneca PLC 0.75%
SAP SE 0.74%

SCHF’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.66%, 1.6%, 1.29%, 1.24%, and 1.02%.

LVMH Moet Hennessy Louis Vuitton SE (0.93%), Novartis AG (0.92%), and Shopify Inc A (0.78%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the SCHF’s holdings at 0.75% and 0.74%.

Risk Analysis

TIP SCHF
Mean Return 0.28 0.58
R-squared 66.57 98.16
Std. Deviation 4.33 15.08
Alpha -0.58 0.53
Beta 1.18 0.99
Sharpe Ratio 0.62 0.42
Treynor Ratio 2.24 5.39

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

The Schwab International Equity ETF (SCHF) has a Treynor Ratio of 5.39 with a Beta of 0.99 and a Standard Deviation of 15.08. Its Sharpe Ratio is 0.42 while SCHF’s Mean Return is 0.58. Furthermore, the fund has a Alpha of 0.53 and a R-squared of 98.16.

TIP’s Mean Return is 0.30 points lower than that of SCHF and its R-squared is 31.59 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than SCHF. The Alpha and Beta of TIP are 1.11 points lower and 0.19 points higher than SCHF’s Alpha and Beta.

Performance

Annual Returns

TIP vs. SCHF - Annual Returns

Year TIP SCHF
2020 10.91% 9.86%
2019 8.28% 22.15%
2018 -1.43% -14.39%
2017 2.92% 25.83%
2016 4.56% 2.88%
2015 -1.59% -2.44%
2014 3.49% -4.44%
2013 -8.65% 20.03%
2012 6.8% 17.12%
2011 13.4% -12.32%
2010 6.1% 8.6%

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 2017 was the strongest year for SCHF, returning 25.83% on an annual basis. The poorest year for SCHF in the last ten years was 2018, with a yield of -14.39%. Most years the Schwab International Equity ETF has given investors modest returns, such as in 2016, 2010, and 2020, when gains were 2.88%, 8.6%, and 9.86% respectively.

Portfolio Growth

TIP vs. SCHF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $14,353 4.07%
SCHF $10,000 $17,089 6.43%

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 SCHF, the end total would have been $17,089. This equates to a $7,089 profit over 10 years and a compound annual growth rate (CAGR) of 6.43%.

TIP’s CAGR is 2.36 percentage points lower than that of SCHF and as a result, would have yielded $2,736 less on a $10,000 investment. Thus, TIP performed worse than SCHF by 2.36% annually.


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