Comparing Bond ETFs: Vanguard's VCSH vs. Schwab's SCHO

Core Viewpoint - The Vanguard Short-Term Corporate Bond ETF (VCSH) and Schwab Short-Term U.S. Treasury ETF (SCHO) are both low-cost investment options targeting the short end of the bond market, with VCSH offering higher yields and more corporate credit risk compared to SCHO, which focuses on U.S. Treasuries for lower volatility [1][2]. Cost & Size Comparison - Both VCSH and SCHO have an expense ratio of 0.03% [3][4]. - As of March 27, 2026, VCSH has a one-year return of 4.7% and a dividend yield of 4.3%, while SCHO has a one-year return of 3.7% and a dividend yield of 4.0% [3][4]. - VCSH has assets under management (AUM) of $48.3 billion, significantly larger than SCHO's AUM of $12.3 billion [3]. Performance & Risk Comparison - Over the past five years, VCSH experienced a maximum drawdown of 9.46%, while SCHO had a maximum drawdown of 5.75% [5]. - The growth of a $1,000 investment over five years would result in $958 for VCSH and $943 for SCHO [5]. Portfolio Composition - SCHO primarily invests in U.S. Treasury securities, with 96% of its assets in cash and Treasuries, making it a low-risk option [6]. - VCSH focuses on investment-grade corporate bonds and cash, resulting in higher yield but also greater exposure to corporate credit risk [7]. Investor Implications - Both VCSH and SCHO are considered compelling choices for diversifying an investment portfolio due to their ultra-low expense ratios [8]. - The choice between VCSH and SCHO depends on individual investor risk tolerance, with VCSH offering higher income potential at the cost of increased risk, while SCHO prioritizes capital preservation with lower yields [10].