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VTIP vs. SCHG: What’s The Difference?

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

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

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

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Summary

VTIPSCHG
NameVanguard Short-Term Inflation-Protected Securities Index Fund ETF SharesSchwab U.S. Large-Cap Growth ETF
CategoryInflation-Protected BondLarge Growth
IssuerVanguardSchwab ETFs
AUM50.67B15.16B
Avg. Return1.79%17.81%
Div. Yield1.35%0.43%
Expense Ratio0.05%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. Large-Cap Growth ETF (SCHG) is a Large Growth fund that is issued by Schwab ETFs. It currently has 15.16B total assets under management and has yielded an average annual return of 17.81% over the past 10 years. The fund has a dividend yield of 0.43% with an expense ratio of 0.04%.

VTIP’s dividend yield is 0.92% higher than that of SCHG (1.35% vs. 0.43%). Also, VTIP yielded on average 16.02% less per year over the past decade (1.79% vs. 17.81%). The expense ratio of VTIP is 0.01 percentage points higher than SCHG’s (0.05% vs. 0.04%).

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Fund Composition

Holdings

VTIP - Holdings

VTIP Bond SectorsWeight
AAA99.87%
Others0.13%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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.

SCHG - Holdings

SCHG HoldingsWeight
Apple Inc11.49%
Microsoft Corp10.91%
Amazon.com Inc7.89%
Facebook Inc A4.45%
Alphabet Inc A3.93%
Alphabet Inc Class C3.82%
Tesla Inc2.8%
NVIDIA Corp2.67%
Visa Inc Class A2.12%
UnitedHealth Group Inc2.02%

SCHG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 11.49%, 10.91%, 7.89%, 4.45%, and 3.93%.

Alphabet Inc Class C (3.82%), Tesla Inc (2.8%), and NVIDIA Corp (2.67%) have a slightly smaller but still significant weight. Visa Inc Class A and UnitedHealth Group Inc are also represented in the SCHG’s holdings at 2.12% and 2.02%.

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Risk Analysis

VTIPSCHG
Mean Return01.46
R-squared092.92
Std. Deviation014.78
Alpha01.97
Beta01.05
Sharpe Ratio01.14
Treynor Ratio016.3

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

The Schwab U.S. Large-Cap Growth ETF (SCHG) has a Sharpe Ratio of 1.14 with a Mean Return of 1.46 and a Standard Deviation of 14.78. Its Treynor Ratio is 16.3 while SCHG’s Beta is 1.05. Furthermore, the fund has a Alpha of 1.97 and a R-squared of 92.92.

VTIP’s Mean Return is 1.46 points lower than that of SCHG and its R-squared is 92.92 points lower. With a Standard Deviation of 0, VTIP is slightly less volatile than SCHG. The Alpha and Beta of VTIP are 1.97 points lower and 1.05 points lower than SCHG’s Alpha and Beta.

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Performance

Annual Returns

VTIP vs. SCHG - Annual Returns

YearVTIPSCHG
20204.97%39.13%
20194.83%36.21%
20180.54%-1.35%
20170.82%28.04%
20162.71%6.76%
2015-0.15%3.26%
2014-1.17%15.74%
2013-1.55%33.96%
20120.0%17.02%
20110.0%-0.67%
20100.0%16.83%

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 2020 was the strongest year for SCHG, returning 39.13% on an annual basis. The poorest year for SCHG in the last ten years was 2018, with a yield of -1.35%. Most years the Schwab U.S. Large-Cap Growth ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 15.74%, 16.83%, and 17.02% respectively.

Portfolio Growth

VTIP vs. SCHG - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VTIP$10,000$11,3051.79%
SCHG$10,000$30,54117.81%

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 SCHG, the end total would have been $30,541. This equates to a $20,541 profit over 7 years and a compound annual growth rate (CAGR) of 17.81%.

VTIP’s CAGR is 16.02 percentage points lower than that of SCHG and as a result, would have yielded $19,236 less on a $10,000 investment. Thus, VTIP performed worse than SCHG by 16.02% annually.


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