VCIT vs. SCHP: What’s The Difference?

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the Schwab U.S. TIPS ETF (SCHP) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and SCHP is a Schwab ETFs Inflation-Protected Bond fund. So, what’s the difference between VCIT and SCHP? And which fund is better?

VCIT and SCHP have the same expense ratio: 0.05%. VCIT is mostly comprised of BBB bonds and SCHP has a high exposure to AAA bond. Overall, VCIT has provided higher returns than SCHP over the past ten years.

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

Summary

VCIT SCHP
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares Schwab U.S. TIPS ETF
Category Corporate Bond Inflation-Protected Bond
Issuer Vanguard Schwab ETFs
AUM 48.39B 18.41B
Avg. Return 5.84% 3.92%
Div. Yield 2.33% 1.97%
Expense Ratio 0.05% 0.05%

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) is a Corporate Bond fund that is issued by Vanguard. It currently has 48.39B total assets under management and has yielded an average annual return of 5.84% over the past 10 years. The fund has a dividend yield of 2.33% with an expense ratio of 0.05%.

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%.

VCIT’s dividend yield is 0.36% higher than that of SCHP (2.33% vs. 1.97%). Also, VCIT yielded on average 1.93% more per year over the past decade (5.84% vs. 3.92%). VCIT and SCHP have the same expense ratio: 0.05%.

Fund Composition

Holdings

VCIT - Holdings

VCIT Bond Sectors Weight
BBB 55.28%
A 37.85%
AA 5.22%
AAA 1.57%
Below B 0.08%
Others 0.0%
B 0.0%
BB 0.0%
US Government 0.0%

VCIT’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 55.28%, 37.85%, 5.22%, 1.57%, and 0.08%. The fund is less weighted towards Others (0.0%), B (0.0%), and BB (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

VCIT SCHP
Mean Return 0.44 0.28
R-squared 63.18 66.16
Std. Deviation 5.08 4.32
Alpha 0.89 -0.5
Beta 1.35 1.17
Sharpe Ratio 0.91 0.64
Treynor Ratio 3.43 2.31

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Treynor Ratio of 3.43 with a R-squared of 63.18 and a Mean Return of 0.44. Its Alpha is 0.89 while VCIT’s Sharpe Ratio is 0.91. Furthermore, the fund has a Standard Deviation of 5.08 and a Beta of 1.35.

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

VCIT’s Mean Return is 0.16 points higher than that of SCHP and its R-squared is 2.98 points lower. With a Standard Deviation of 5.08, VCIT is slightly more volatile than SCHP. The Alpha and Beta of VCIT are 1.39 points higher and 0.18 points higher than SCHP’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. SCHP - Annual Returns

Year VCIT SCHP
2020 9.55% 10.94%
2019 13.97% 8.36%
2018 -1.75% -1.31%
2017 5.5% 2.95%
2016 5.3% 4.6%
2015 0.88% -1.5%
2014 7.47% 3.56%
2013 -1.8% -8.66%
2012 11.36% 6.83%
2011 7.94% 13.38%
2010 10.65% 0.0%

VCIT had its best year in 2019 with an annual return of 13.97%. VCIT’s worst year over the past decade yielded -1.8% and occurred in 2013. In most years the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares provided moderate returns such as in 2017, 2014, and 2011 where annual returns amounted to 5.5%, 7.47%, and 7.94% 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

VCIT vs. SCHP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $17,439 5.84%
SCHP $10,000 $14,418 3.92%

A $10,000 investment in VCIT would have resulted in a final balance of $17,439. This is a profit of $7,439 over 10 years and amounts to a compound annual growth rate (CAGR) of 5.84%.

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%.

VCIT’s CAGR is 1.93 percentage points higher than that of SCHP and as a result, would have yielded $3,021 more on a $10,000 investment. Thus, VCIT outperformed SCHP by 1.93% annually.


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