VYM vs. SCHP: What’s The Difference?

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

The expense ratio of VYM is 0.01 percentage points higher than SCHP’s (0.06% vs. 0.05%). VYM also has a high exposure to the financial services sector while SCHP is mostly comprised of AAA bonds. Overall, VYM has provided higher returns than SCHP over the past ten years.

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

Summary

VYM SCHP
Name Vanguard High Dividend Yield Index Fund ETF Shares Schwab U.S. TIPS ETF
Category Large Value Inflation-Protected Bond
Issuer Vanguard Schwab ETFs
AUM 48.5B 18.41B
Avg. Return 12.20% 3.92%
Div. Yield 2.79% 1.97%
Expense Ratio 0.06% 0.05%

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) is a Large Value fund that is issued by Vanguard. It currently has 48.5B total assets under management and has yielded an average annual return of 12.20% over the past 10 years. The fund has a dividend yield of 2.79% with an expense ratio of 0.06%.

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%.

VYM’s dividend yield is 0.82% higher than that of SCHP (2.79% vs. 1.97%). Also, VYM yielded on average 8.28% more per year over the past decade (12.20% vs. 3.92%). The expense ratio of VYM is 0.01 percentage points higher than SCHP’s (0.06% vs. 0.05%).

Fund Composition

Holdings

VYM - Holdings

VYM Holdings Weight
JPMorgan Chase & Co 3.53%
Johnson & Johnson 3.28%
The Home Depot Inc 2.59%
Procter & Gamble Co 2.48%
Bank of America Corp 2.35%
Exxon Mobil Corp 2.02%
Comcast Corp Class A 1.96%
Verizon Communications Inc 1.75%
Intel Corp 1.71%
Cisco Systems Inc 1.69%

VYM’s Top Holdings are JPMorgan Chase & Co, Johnson & Johnson, The Home Depot Inc, Procter & Gamble Co, and Bank of America Corp at 3.53%, 3.28%, 2.59%, 2.48%, and 2.35%.

Exxon Mobil Corp (2.02%), Comcast Corp Class A (1.96%), and Verizon Communications Inc (1.75%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the VYM’s holdings at 1.71% and 1.69%.

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

VYM SCHP
Mean Return 1.04 0.28
R-squared 88.88 66.16
Std. Deviation 12.69 4.32
Alpha -0.7 -0.5
Beta 0.88 1.17
Sharpe Ratio 0.93 0.64
Treynor Ratio 13.24 2.31

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a Standard Deviation of 12.69 with a Treynor Ratio of 13.24 and a Alpha of -0.7. Its R-squared is 88.88 while VYM’s Mean Return is 1.04. Furthermore, the fund has a Sharpe Ratio of 0.93 and a Beta of 0.88.

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

VYM’s Mean Return is 0.76 points higher than that of SCHP and its R-squared is 22.72 points higher. With a Standard Deviation of 12.69, VYM is slightly more volatile than SCHP. The Alpha and Beta of VYM are 0.20 points lower and 0.29 points lower than SCHP’s Alpha and Beta.

Performance

Annual Returns

VYM vs. SCHP - Annual Returns

Year VYM SCHP
2020 1.14% 10.94%
2019 24.2% 8.36%
2018 -5.87% -1.31%
2017 16.42% 2.95%
2016 16.87% 4.6%
2015 0.33% -1.5%
2014 13.47% 3.56%
2013 30.26% -8.66%
2012 12.68% 6.83%
2011 10.5% 13.38%
2010 14.17% 0.0%

VYM had its best year in 2013 with an annual return of 30.26%. VYM’s worst year over the past decade yielded -5.87% and occurred in 2018. In most years the Vanguard High Dividend Yield Index Fund ETF Shares provided moderate returns such as in 2012, 2014, and 2010 where annual returns amounted to 12.68%, 13.47%, and 14.17% 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

VYM vs. SCHP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VYM $10,000 $29,705 12.20%
SCHP $10,000 $14,418 3.92%

A $10,000 investment in VYM would have resulted in a final balance of $29,705. This is a profit of $19,705 over 10 years and amounts to a compound annual growth rate (CAGR) of 12.20%.

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%.

VYM’s CAGR is 8.28 percentage points higher than that of SCHP and as a result, would have yielded $15,287 more on a $10,000 investment. Thus, VYM outperformed SCHP by 8.28% annually.


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