VCSH vs. SCHP: What’s The Difference?

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

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

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

Summary

VCSH SCHP
Name Vanguard Short-Term Corporate Bond Index Fund ETF Shares Schwab U.S. TIPS ETF
Category Short-Term Bond Inflation-Protected Bond
Issuer Vanguard Schwab ETFs
AUM 47.88B 18.41B
Avg. Return 3.12% 3.92%
Div. Yield 1.89% 1.97%
Expense Ratio 0.05% 0.05%

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) is a Short-Term Bond fund that is issued by Vanguard. It currently has 47.88B total assets under management and has yielded an average annual return of 3.12% over the past 10 years. The fund has a dividend yield of 1.89% 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%.

VCSH’s dividend yield is 0.08% lower than that of SCHP (1.89% vs. 1.97%). Also, VCSH yielded on average 0.80% less per year over the past decade (3.12% vs. 3.92%). VCSH and SCHP have the same expense ratio: 0.05%.

Fund Composition

Holdings

VCSH - Holdings

VCSH Bond Sectors Weight
BBB 47.49%
A 43.06%
AA 8.45%
AAA 0.95%
Below B 0.03%
Others 0.02%
B 0.0%
BB 0.0%
US Government 0.0%

VCSH’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 47.49%, 43.06%, 8.45%, 0.95%, and 0.03%. The fund is less weighted towards Others (0.02%), 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

VCSH SCHP
Mean Return 0.24 0.28
R-squared 37.53 66.16
Std. Deviation 2.34 4.32
Alpha 0.93 -0.5
Beta 0.48 1.17
Sharpe Ratio 0.97 0.64
Treynor Ratio 4.75 2.31

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) has a Sharpe Ratio of 0.97 with a Standard Deviation of 2.34 and a Treynor Ratio of 4.75. Its Mean Return is 0.24 while VCSH’s Beta is 0.48. Furthermore, the fund has a Alpha of 0.93 and a R-squared of 37.53.

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

VCSH’s Mean Return is 0.04 points lower than that of SCHP and its R-squared is 28.63 points lower. With a Standard Deviation of 2.34, VCSH is slightly less volatile than SCHP. The Alpha and Beta of VCSH are 1.43 points higher and 0.69 points lower than SCHP’s Alpha and Beta.

Performance

Annual Returns

VCSH vs. SCHP - Annual Returns

Year VCSH SCHP
2020 5.08% 10.94%
2019 6.85% 8.36%
2018 0.91% -1.31%
2017 2.45% 2.95%
2016 2.63% 4.6%
2015 1.25% -1.5%
2014 1.96% 3.56%
2013 1.37% -8.66%
2012 5.74% 6.83%
2011 2.94% 13.38%
2010 5.51% 0.0%

VCSH had its best year in 2019 with an annual return of 6.85%. VCSH’s worst year over the past decade yielded 0.91% and occurred in 2018. In most years the Vanguard Short-Term Corporate Bond Index Fund ETF Shares provided moderate returns such as in 2017, 2016, and 2011 where annual returns amounted to 2.45%, 2.63%, and 2.94% 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

VCSH vs. SCHP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCSH $10,000 $13,569 3.12%
SCHP $10,000 $14,418 3.92%

A $10,000 investment in VCSH would have resulted in a final balance of $13,569. This is a profit of $3,569 over 10 years and amounts to a compound annual growth rate (CAGR) of 3.12%.

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%.

VCSH’s CAGR is 0.80 percentage points lower than that of SCHP and as a result, would have yielded $849 less on a $10,000 investment. Thus, VCSH performed worse than SCHP by 0.80% annually.


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