SCHO beats ISTB on cost and risk despite lower yield
Schwab Short-Term U.S. Treasury ETF (SCHO) offers a 0.03% expense ratio and 5.6% max drawdown, outperforming iShares' ISTB on risk-adjusted metrics as corporate credit spreads reach historic lows.
The Schwab Short-Term U.S. Treasury ETF (SCHO) charges a 0.03% expense ratio. The iShares Core 1-5 Year USD Bond ETF (ISTB) charges 0.06%. SCHO holds only U.S. Treasury securities. ISTB holds 7,427 positions including corporate debt and mortgage-backed securities.
SCHO delivered a 2.8% total return over the trailing 12 months. ISTB delivered a 2.9% total return over the same period. SCHO paid a 3.9% dividend yield. ISTB paid a 4.3% dividend yield. The yield difference is 0.4 percentage points.
Risk metrics favor the Treasury fund
SCHO experienced a 5.6% maximum drawdown over five years. ISTB experienced a 9.3% maximum drawdown over the same period. SCHO has a beta of 0.05. ISTB has a beta of 0.11. SCHO assets under management total $13.0 billion. ISTB assets under management total $5.1 billion.
A $1,000 investment in SCHO grew to $1,098 over five years. A $1,000 investment in ISTB grew to $1,095 over five years. SCHO holds 97 positions. No single position exceeds 0.15% of the portfolio. ISTB holds nearly 7,000 bonds.
Credit spreads limit income advantage
Corporate bond credit spreads are near historic lows. Investors receive little extra compensation for credit risk in ISTB. SCHO avoids credit risk entirely. The 0.4 percentage point yield gap in ISTB does not offset its higher cost and volatility.
GN auto markets/bonds: corporate bonds notes that SCHO is the stronger near-term choice for capital preservation. ISTB suits investors prioritizing maximum income. SCHO provides shallower drawdowns and lower fees. ISTB offers broader diversification and higher payouts.
