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.
Summary
| TIP | SCHX | |
| Name | iShares TIPS Bond ETF | Schwab U.S. Large-Cap ETF |
| Category | Inflation-Protected Bond | Large Blend |
| Issuer | iShares | Schwab ETFs |
| AUM | 28.3B | 30.89B |
| Avg. Return | 4.07% | 14.60% |
| Div. Yield | 1.87% | 1.41% |
| Expense Ratio | 0.19% | 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%).
Fund Composition
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.
| SCHX Holdings | Weight |
| Apple Inc | 5.37% |
| Microsoft Corp | 5.1% |
| Amazon.com Inc | 3.69% |
| Facebook Inc A | 2.08% |
| Alphabet Inc A | 1.84% |
| Alphabet Inc Class C | 1.78% |
| Berkshire Hathaway Inc Class B | 1.32% |
| Tesla Inc | 1.31% |
| NVIDIA Corp | 1.25% |
| JPMorgan Chase & Co | 1.18% |
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%.
Risk Analysis
| TIP | SCHX | |
| Mean Return | 0.28 | 1.24 |
| R-squared | 66.57 | 99.83 |
| Std. Deviation | 4.33 | 13.8 |
| Alpha | -0.58 | -0.14 |
| Beta | 1.18 | 1.02 |
| Sharpe Ratio | 0.62 | 1.03 |
| Treynor Ratio | 2.24 | 14.06 |
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.
Performance
Annual Returns
| Year | TIP | SCHX |
| 2020 | 10.91% | 20.9% |
| 2019 | 8.28% | 31.4% |
| 2018 | -1.43% | -4.52% |
| 2017 | 2.92% | 21.91% |
| 2016 | 4.56% | 11.78% |
| 2015 | -1.59% | 1.02% |
| 2014 | 3.49% | 13.33% |
| 2013 | -8.65% | 32.54% |
| 2012 | 6.8% | 16.06% |
| 2011 | 13.4% | 1.61% |
| 2010 | 6.1% | 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
| Fund | Initial Balance | Final Balance | CAGR |
| TIP | $10,000 | $14,353 | 4.07% |
| SCHX | $10,000 | $36,987 | 14.60% |
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.
Current recommendations:
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.
I believe that money is just a means to an end: to be free to spend your time as you wish, to maximize your positive impact on the world.
