TIP vs. SCHP: What’s The Difference?

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

The expense ratio of TIP is 0.14 percentage points higher than SCHP’s (0.19% vs. 0.05%). TIP is mostly comprised of AAA bonds and SCHP has a high exposure to AAA bond. Overall, TIP has provided higher returns than SCHP over the past ten years.

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

Summary

TIP SCHP
Name iShares TIPS Bond ETF Schwab U.S. TIPS ETF
Category Inflation-Protected Bond Inflation-Protected Bond
Issuer iShares Schwab ETFs
AUM 28.3B 18.41B
Avg. Return 4.07% 3.92%
Div. Yield 1.87% 1.97%
Expense Ratio 0.19% 0.05%

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. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.

TIP’s dividend yield is 0.10% lower than that of SCHP (1.87% vs. 1.97%). Also, TIP yielded on average 0.16% more per year over the past decade (4.07% vs. 3.92%). The expense ratio of TIP is 0.14 percentage points higher than SCHP’s (0.19% vs. 0.05%).

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.

SCHP - Holdings

SCHP Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SCHP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 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.

Risk Analysis

TIP SCHP
Mean Return 0.28 0.28
R-squared 66.57 66.16
Std. Deviation 4.33 4.32
Alpha -0.58 -0.5
Beta 1.18 1.17
Sharpe Ratio 0.62 0.64
Treynor Ratio 2.24 2.31

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

The Schwab U.S. TIPS ETF (SCHP) has a Standard Deviation of 4.32 with a Beta of 1.17 and a Alpha of -0.5. Its Mean Return is 0.28 while SCHP’s R-squared is 66.16. Furthermore, the fund has a Sharpe Ratio of 0.64 and a Treynor Ratio of 2.31.

TIP’s Mean Return is 0.00 points lower than that of SCHP and its R-squared is 0.41 points higher. With a Standard Deviation of 4.33, TIP is slightly more volatile than SCHP. The Alpha and Beta of TIP are 0.08 points lower and 0.01 points higher than SCHP’s Alpha and Beta.

Performance

Annual Returns

TIP vs. SCHP - Annual Returns

Year TIP SCHP
2020 10.91% 10.94%
2019 8.28% 8.36%
2018 -1.43% -1.31%
2017 2.92% 2.95%
2016 4.56% 4.6%
2015 -1.59% -1.5%
2014 3.49% 3.56%
2013 -8.65% -8.66%
2012 6.8% 6.83%
2011 13.4% 13.38%
2010 6.1% 0.0%

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 2011 was the strongest year for SCHP, returning 13.38% on an annual basis. The poorest year for SCHP in the last ten years was 2013, with a yield of -8.66%. Most years the Schwab U.S. TIPS ETF has given investors modest returns, such as in 2017, 2014, and 2016, when gains were 2.95%, 3.56%, and 4.6% respectively.

Portfolio Growth

TIP vs. SCHP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $14,353 4.07%
SCHP $10,000 $14,418 3.92%

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 SCHP, the end total would have been $14,418. This equates to a $4,418 profit over 10 years and a compound annual growth rate (CAGR) of 3.92%.

TIP’s CAGR is 0.16 percentage points higher than that of SCHP and as a result, would have yielded $65 less on a $10,000 investment. Thus, TIP outperformed SCHP by 0.16% annually.


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