VCSH vs SCHO: Corporate Bonds Face Off Against Treasuries

Vanguard Short-Term Corporate Bond ETF (NASDAQ:VCSH) and Schwab Short-Term U.S. Treasury ETF (NYSEMKT:SCHO) provide low-cost exposure to short-duration debt, differing primarily in their credit quality and yield potential.

Investors seeking to stabilize a portfolio often look toward the short end of the yield curve for lower interest rate sensitivity. These two funds offer liquid, ultra-low-cost entries into the fixed-income market. While they share similar duration targets, their underlying holdings lead to distinct risk-reward profiles in varying economic climates.

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

Both funds are exceptionally affordable, each sporting a 0.03% expense ratio. The Vanguard fund currently provides a higher payout, though this yield gap of 0.59 percentage points compensates investors for the added risk of lending to corporations instead of the government.

Growth of $1,000 over 5 years (total return)

Schwab Short-Term U.S. Treasury ETF invests in publicly issued U.S. Treasury securities with remaining maturities between one and three years. This is a fixed-income fund with no equity sector breakdown. Its portfolio contains 97 holdings, and the fund was launched in 2010. Schwab Short-Term U.S. Treasury ETF has paid $0.93 per share over the trailing 12 months, which on its recent ~$24.11 share price works out to a 3.9% yield.

Vanguard Short-Term Corporate Bond ETF targets investment-grade corporate debt with dollar-weighted average maturities between one and five years. It is also a fixed-income fund with no equity sector breakdown. Its largest positions include high-quality corporate notes, and the fund is highly diversified with more than 3,000 holdings; no single position exceeds 0.5% of the portfolio. It was launched in 2009. Vanguard Short-Term Corporate Bond ETF has paid $3.51 per share over the trailing 12 months, which on its recent ~$78.72 share price works out to a 4.5% yield.

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