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TIP vs. SCHX: What’s The Difference?

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

The expense ratio of TIP is 0.16 percentage points higher than SCHX’s (0.19% vs. 0.03%). TIP is mostly comprised of AAA bonds while SCHX has a high exposure to the technology sector. Overall, TIP has provided lower returns than SCHX over the past ten years.

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

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Summary

TIPSCHX
NameiShares TIPS Bond ETFSchwab U.S. Large-Cap ETF
CategoryInflation-Protected BondLarge Blend
IssueriSharesSchwab ETFs
AUM28.3B30.89B
Avg. Return4.07%14.60%
Div. Yield1.87%1.41%
Expense Ratio0.19%0.03%

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 ETF (SCHX) is a Large Blend fund that is issued by Schwab ETFs. It currently has 30.89B total assets under management and has yielded an average annual return of 14.60% over the past 10 years. The fund has a dividend yield of 1.41% with an expense ratio of 0.03%.

TIP’s dividend yield is 0.46% higher than that of SCHX (1.87% vs. 1.41%). Also, TIP yielded on average 10.53% less per year over the past decade (4.07% vs. 14.60%). The expense ratio of TIP is 0.16 percentage points higher than SCHX’s (0.19% vs. 0.03%).

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Fund Composition

Holdings

TIP - Holdings

TIP Bond SectorsWeight
AAA99.31%
Others0.69%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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.

SCHX - Holdings

SCHX HoldingsWeight
Apple Inc5.37%
Microsoft Corp5.1%
Amazon.com Inc3.69%
Facebook Inc A2.08%
Alphabet Inc A1.84%
Alphabet Inc Class C1.78%
Berkshire Hathaway Inc Class B1.32%
Tesla Inc1.31%
NVIDIA Corp1.25%
JPMorgan Chase & Co1.18%

SCHX’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 5.37%, 5.1%, 3.69%, 2.08%, and 1.84%.

Alphabet Inc Class C (1.78%), Berkshire Hathaway Inc Class B (1.32%), and Tesla Inc (1.31%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHX’s holdings at 1.25% and 1.18%.

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Risk Analysis

TIPSCHX
Mean Return0.281.24
R-squared66.5799.83
Std. Deviation4.3313.8
Alpha-0.58-0.14
Beta1.181.02
Sharpe Ratio0.621.03
Treynor Ratio2.2414.06

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

The Schwab U.S. Large-Cap ETF (SCHX) has a Alpha of -0.14 with a Treynor Ratio of 14.06 and a Mean Return of 1.24. Its Beta is 1.02 while SCHX’s Standard Deviation is 13.8. Furthermore, the fund has a R-squared of 99.83 and a Sharpe Ratio of 1.03.

TIP’s Mean Return is 0.96 points lower than that of SCHX and its R-squared is 33.26 points lower. With a Standard Deviation of 4.33, TIP is slightly less volatile than SCHX. The Alpha and Beta of TIP are 0.44 points lower and 0.16 points higher than SCHX’s Alpha and Beta.

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Performance

Annual Returns

TIP vs. SCHX - Annual Returns

YearTIPSCHX
202010.91%20.9%
20198.28%31.4%
2018-1.43%-4.52%
20172.92%21.91%
20164.56%11.78%
2015-1.59%1.02%
20143.49%13.33%
2013-8.65%32.54%
20126.8%16.06%
201113.4%1.61%
20106.1%15.88%

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 SCHX, returning 32.54% on an annual basis. The poorest year for SCHX in the last ten years was 2018, with a yield of -4.52%. Most years the Schwab U.S. Large-Cap ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.33%, 15.88%, and 16.06% respectively.

Portfolio Growth

TIP vs. SCHX - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
TIP$10,000$14,3534.07%
SCHX$10,000$36,98714.60%

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 SCHX, the end total would have been $36,987. This equates to a $26,987 profit over 10 years and a compound annual growth rate (CAGR) of 14.60%.

TIP’s CAGR is 10.53 percentage points lower than that of SCHX and as a result, would have yielded $22,634 less on a $10,000 investment. Thus, TIP performed worse than SCHX by 10.53% annually.


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