The Vanguard FTSE Europe Index Fund ETF Shares (VGK) and the Schwab U.S. TIPS ETF (SCHP) are both among the Top 100 ETFs. VGK is a Vanguard Europe Stock fund and SCHP is a Schwab ETFs Inflation-Protected Bond fund. So, what’s the difference between VGK and SCHP? And which fund is better?
The expense ratio of VGK is 0.03 percentage points higher than SCHP’s (0.08% vs. 0.05%). VGK also has a high exposure to the financial services sector while SCHP is mostly comprised of AAA bonds. Overall, VGK has provided higher returns than SCHP over the past 10 years.
In this article, we’ll compare VGK vs. SCHP. We’ll look at portfolio growth and annual returns, as well as at their performance and fund composition. Moreover, I’ll also discuss VGK’s and SCHP’s holdings, industry exposure, and risk metrics and examine how these affect their overall returns.
Summary
| VGK | SCHP | |
| Name | Vanguard FTSE Europe Index Fund ETF Shares | Schwab U.S. TIPS ETF |
| Category | Europe Stock | Inflation-Protected Bond |
| Issuer | Vanguard | Schwab ETFs |
| AUM | 25.7B | 18.41B |
| Avg. Return | 6.68% | 3.92% |
| Div. Yield | 2.52% | 1.97% |
| Expense Ratio | 0.08% | 0.05% |
The Vanguard FTSE Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.
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%.
VGK’s dividend yield is 0.55% higher than that of SCHP (2.52% vs. 1.97%). Also, VGK yielded on average 2.76% more per year over the past decade (6.68% vs. 3.92%). The expense ratio of VGK is 0.03 percentage points higher than SCHP’s (0.08% vs. 0.05%).
Fund Composition
Holdings
| VGK Holdings | Weight |
| Nestle SA | 2.82% |
| ASML Holding NV | 2.2% |
| Roche Holding AG | 2.13% |
| LVMH Moet Hennessy Louis Vuitton SE | 1.58% |
| Novartis AG | 1.55% |
| AstraZeneca PLC | 1.27% |
| SAP SE | 1.25% |
| Unilever PLC | 1.23% |
| Novo Nordisk A/S B | 1.09% |
| Siemens AG | 0.96% |
VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.
AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.
| 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
| VGK | SCHP | |
| Mean Return | 0.61 | 0.28 |
| R-squared | 92.76 | 66.16 |
| Std. Deviation | 16.65 | 4.32 |
| Alpha | 0.45 | -0.5 |
| Beta | 1.06 | 1.17 |
| Sharpe Ratio | 0.4 | 0.64 |
| Treynor Ratio | 5.12 | 2.31 |
The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Mean Return of 0.61 with a Alpha of 0.45 and a Standard Deviation of 16.65. Its Beta is 1.06 while VGK’s Treynor Ratio is 5.12. Furthermore, the fund has a R-squared of 92.76 and a Sharpe Ratio of 0.4.
The Schwab U.S. TIPS ETF (SCHP) has a Beta of 1.17 with a Mean Return of 0.28 and a Alpha of -0.5. Its Sharpe Ratio is 0.64 while SCHP’s Standard Deviation is 4.32. Furthermore, the fund has a Treynor Ratio of 2.31 and a R-squared of 66.16.
VGK’s Mean Return is 0.33 points higher than that of SCHP and its R-squared is 26.60 points higher. With a Standard Deviation of 16.65, VGK is slightly more volatile than SCHP. The Alpha and Beta of VGK are 0.95 points higher and 0.11 points lower than SCHP’s Alpha and Beta.
Performance
Annual Returns
| Year | VGK | SCHP |
| 2020 | 6.5% | 10.94% |
| 2019 | 24.26% | 8.36% |
| 2018 | -14.79% | -1.31% |
| 2017 | 27.06% | 2.95% |
| 2016 | -0.59% | 4.6% |
| 2015 | -1.87% | -1.5% |
| 2014 | -6.56% | 3.56% |
| 2013 | 24.93% | -8.66% |
| 2012 | 21.01% | 6.83% |
| 2011 | -11.49% | 13.38% |
| 2010 | 5.01% | 0.0% |
VGK had its best year in 2017 with an annual return of 27.06%. VGK’s worst year over the past decade yielded -14.79% and occurred in 2018. In most years the Vanguard FTSE Europe Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to -0.59%, 5.01%, and 6.5% 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
| Fund | Initial Balance | Final Balance | CAGR |
| VGK | $10,000 | $17,475 | 6.68% |
| SCHP | $10,000 | $14,418 | 3.92% |
A $10,000 investment in VGK would have resulted in a final balance of $17,475. This is a profit of $7,475 over 10 years and amounts to a compound annual growth rate (CAGR) of 6.68%.
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%.
VGK’s CAGR is 2.76 percentage points higher than that of SCHP and as a result, would have yielded $3,057 more on a $10,000 investment. Thus, VGK outperformed SCHP by 2.76% annually.
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