TIP vs. SCHG: What’s The Difference?

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

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

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

Summary

TIP SCHG
Name iShares TIPS Bond ETF Schwab U.S. Large-Cap Growth ETF
Category Inflation-Protected Bond Large Growth
Issuer iShares Schwab ETFs
AUM 28.3B 15.16B
Avg. Return 4.07% 17.81%
Div. Yield 1.87% 0.43%
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. Large-Cap Growth ETF (SCHG) is a Large Growth fund that is issued by Schwab ETFs. It currently has 15.16B total assets under management and has yielded an average annual return of 17.81% over the past 10 years. The fund has a dividend yield of 0.43% with an expense ratio of 0.04%.

TIP’s dividend yield is 1.44% higher than that of SCHG (1.87% vs. 0.43%). Also, TIP yielded on average 13.74% less per year over the past decade (4.07% vs. 17.81%). The expense ratio of TIP is 0.15 percentage points higher than SCHG’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.

SCHG - Holdings

SCHG Holdings Weight
Apple Inc 11.49%
Microsoft Corp 10.91%
Amazon.com Inc 7.89%
Facebook Inc A 4.45%
Alphabet Inc A 3.93%
Alphabet Inc Class C 3.82%
Tesla Inc 2.8%
NVIDIA Corp 2.67%
Visa Inc Class A 2.12%
UnitedHealth Group Inc 2.02%

SCHG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 11.49%, 10.91%, 7.89%, 4.45%, and 3.93%.

Alphabet Inc Class C (3.82%), Tesla Inc (2.8%), and NVIDIA Corp (2.67%) have a slightly smaller but still significant weight. Visa Inc Class A and UnitedHealth Group Inc are also represented in the SCHG’s holdings at 2.12% and 2.02%.

Risk Analysis

TIP SCHG
Mean Return 0.28 1.46
R-squared 66.57 92.92
Std. Deviation 4.33 14.78
Alpha -0.58 1.97
Beta 1.18 1.05
Sharpe Ratio 0.62 1.14
Treynor Ratio 2.24 16.3

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

The Schwab U.S. Large-Cap Growth ETF (SCHG) has a Alpha of 1.97 with a Standard Deviation of 14.78 and a Beta of 1.05. Its Mean Return is 1.46 while SCHG’s R-squared is 92.92. Furthermore, the fund has a Treynor Ratio of 16.3 and a Sharpe Ratio of 1.14.

TIP’s Mean Return is 1.18 points lower than that of SCHG and its R-squared is 26.35 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than SCHG. The Alpha and Beta of TIP are 2.55 points lower and 0.13 points higher than SCHG’s Alpha and Beta.

Performance

Annual Returns

TIP vs. SCHG - Annual Returns

Year TIP SCHG
2020 10.91% 39.13%
2019 8.28% 36.21%
2018 -1.43% -1.35%
2017 2.92% 28.04%
2016 4.56% 6.76%
2015 -1.59% 3.26%
2014 3.49% 15.74%
2013 -8.65% 33.96%
2012 6.8% 17.02%
2011 13.4% -0.67%
2010 6.1% 16.83%

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 2020 was the strongest year for SCHG, returning 39.13% on an annual basis. The poorest year for SCHG in the last ten years was 2018, with a yield of -1.35%. Most years the Schwab U.S. Large-Cap Growth ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 15.74%, 16.83%, and 17.02% respectively.

Portfolio Growth

TIP vs. SCHG - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $14,353 4.07%
SCHG $10,000 $47,556 17.81%

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 SCHG, the end total would have been $47,556. This equates to a $37,556 profit over 10 years and a compound annual growth rate (CAGR) of 17.81%.

TIP’s CAGR is 13.74 percentage points lower than that of SCHG and as a result, would have yielded $33,203 less on a $10,000 investment. Thus, TIP performed worse than SCHG by 13.74% annually.


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