VTIP vs. SCHA: What’s The Difference?

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

The expense ratio of VTIP is 0.01 percentage points higher than SCHA’s (0.05% vs. 0.04%). VTIP is mostly comprised of AAA bonds while SCHA has a high exposure to the healthcare sector. Overall, VTIP has provided lower returns than SCHA over the past 7 years.

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

Summary

VTIP SCHA
Name Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares Schwab U.S. Small-Cap ETF
Category Inflation-Protected Bond Small Blend
Issuer Vanguard Schwab ETFs
AUM 50.67B 16.51B
Avg. Return 1.79% 12.62%
Div. Yield 1.35% 0.98%
Expense Ratio 0.05% 0.04%

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.

The Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.

VTIP’s dividend yield is 0.37% higher than that of SCHA (1.35% vs. 0.98%). Also, VTIP yielded on average 10.83% less per year over the past decade (1.79% vs. 12.62%). The expense ratio of VTIP is 0.01 percentage points higher than SCHA’s (0.05% vs. 0.04%).

Fund Composition

Holdings

VTIP - Holdings

VTIP Bond Sectors Weight
AAA 99.87%
Others 0.13%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 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.

SCHA - Holdings

SCHA Holdings Weight
AMC Entertainment Holdings Inc Class A 0.67%
Caesars Entertainment Inc 0.51%
Cloudflare Inc 0.48%
NovoCure Ltd 0.45%
Plug Power Inc 0.41%
10x Genomics Inc Ordinary Shares – Class A 0.34%
GameStop Corp Class A 0.28%
RH 0.27%
Penn National Gaming Inc 0.27%
Axon Enterprise Inc 0.27%

SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.

10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.

Risk Analysis

VTIP SCHA
Mean Return 0 1.14
R-squared 0 82.26
Std. Deviation 0 18.68
Alpha 0 -4.65
Beta 0 1.25
Sharpe Ratio 0 0.7
Treynor Ratio 0 9.62

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a Treynor Ratio of 0 with a R-squared of 0 and a Sharpe Ratio of 0. Its Beta is 0 while VTIP’s Alpha is 0. Furthermore, the fund has a Mean Return of 0 and a Standard Deviation of 0.

The Schwab U.S. Small-Cap ETF (SCHA) has a R-squared of 82.26 with a Beta of 1.25 and a Treynor Ratio of 9.62. Its Standard Deviation is 18.68 while SCHA’s Sharpe Ratio is 0.7. Furthermore, the fund has a Mean Return of 1.14 and a Alpha of -4.65.

VTIP’s Mean Return is 1.14 points lower than that of SCHA and its R-squared is 82.26 points lower. With a Standard Deviation of 0, VTIP is slightly less volatile than SCHA. The Alpha and Beta of VTIP are 4.65 points higher and 1.25 points lower than SCHA’s Alpha and Beta.

Performance

Annual Returns

VTIP vs. SCHA - Annual Returns

Year VTIP SCHA
2020 4.97% 19.35%
2019 4.83% 26.54%
2018 0.54% -11.75%
2017 0.82% 15.04%
2016 2.71% 19.88%
2015 -0.15% -4.24%
2014 -1.17% 6.53%
2013 -1.55% 39.59%
2012 0.0% 18.24%
2011 0.0% -2.95%
2010 0.0% 28.31%

VTIP had its best year in 2020 with an annual return of 4.97%. VTIP’s worst year over the past decade yielded -1.55% and occurred in 2013. In most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares provided moderate returns such as in 2011, 2010, and 2018 where annual returns amounted to 0.0%, 0.0%, and 0.54% respectively.

The year 2013 was the strongest year for SCHA, returning 39.59% on an annual basis. The poorest year for SCHA in the last ten years was 2018, with a yield of -11.75%. Most years the Schwab U.S. Small-Cap ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 15.04%, 18.24%, and 19.35% respectively.

Portfolio Growth

VTIP vs. SCHA - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VTIP $10,000 $11,305 1.79%
SCHA $10,000 $18,750 12.62%

A $10,000 investment in VTIP would have resulted in a final balance of $11,305. This is a profit of $1,305 over 7 years and amounts to a compound annual growth rate (CAGR) of 1.79%.

With a $10,000 investment in SCHA, the end total would have been $18,750. This equates to a $8,750 profit over 7 years and a compound annual growth rate (CAGR) of 12.62%.

VTIP’s CAGR is 10.83 percentage points lower than that of SCHA and as a result, would have yielded $7,445 less on a $10,000 investment. Thus, VTIP performed worse than SCHA by 10.83% annually.


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