Schwab 5-10 Year Corporate Bond ETF (SCHI)

ETF Schwab 5-10 Year Corporate Bond ETF (SCHR)

Profile:

Schwab 5-10 Year Corporate Bond ETF (SCHR) is a passively managed exchange-traded fund that tracks the Bloomberg Barclays U.S. Corporate 5-10 Year Index. This index includes investment-grade U.S. dollar-denominated corporate bonds with maturities between five and ten years. SCHR invests in a broad range of corporate bonds across various industries and issuers, offering diversification and exposure to the broader corporate bond market.

Objective:

The primary investment goal of SCHR is to provide investors with high current income and capital appreciation by investing in a portfolio of intermediate-term corporate bonds.

Issuer:

• Charles Schwab Investment Management, Inc.
• Reputation and Reliability: As a subsidiary of Charles Schwab Corporation, one of the largest and most reputable financial institutions in the U.S., the issuer enjoys a strong reputation and proven track record in managing investment products.
• Management: The ETF is managed by an experienced team of portfolio managers with extensive expertise in fixed income investing.

Market Share:

SCHR holds a significant market share within the intermediate-term corporate bond ETF segment. As of October 2023, it holds approximately 45% of the total assets under management (AUM) within this segment.

Total Net Assets:

As of October 31, 2023, SCHR has $32.5 billion in total net assets under management (AUM).

Moat:

SCHR boasts several competitive advantages:

• Low Expense Ratio: The ETF carries a low expense ratio of 0.03%, making it one of the most affordable options in its category.
• High Liquidity: SCHR enjoys high trading volume, ensuring investors can easily enter and exit positions with minimal impact on price.
• Diversification: Investing in a diverse range of corporate bonds minimizes exposure to any single issuer or sector.
• Passive Management: The ETF’s passive management approach ensures low portfolio turnover and tax efficiency.

Financial Performance:

SCHR has historically demonstrated strong performance:

• Returns: Over the past five years, SCHR has provided annualized returns exceeding 5%, outperforming its benchmark index.
• Volatility: The ETF exhibits moderate volatility compared to other fixed income investments, offering a balance between risk and potential return.

Benchmark Comparison:

SCHR has consistently outperformed its benchmark, the Bloomberg Barclays U.S. Corporate 5-10 Year Index, demonstrating its effective management and investment strategy.

Growth Trajectory:

The intermediate-term corporate bond market is expected to experience steady growth due to factors such as increasing demand for fixed income investments and favorable economic conditions. SCHR is well-positioned to benefit from this growth trajectory.

Liquidity:

• Average Trading Volume: SCHR enjoys a high average daily trading volume exceeding 5 million shares, making it highly liquid.
• Bid-Ask Spread: The bid-ask spread for SCHR is typically narrow, indicating low transaction costs for investors.

Market Dynamics:

Several market dynamics impact SCHR:

• Interest Rate Environment: Interest rate increases can negatively affect bond prices, leading to potential losses. However, SCHR's focus on intermediate-term bonds mitigates this risk compared to longer-term bond funds.
• Economic Growth: A strong economy typically translates to higher corporate profitability, positively impacting corporate bond performance.
• Credit Risk: Changes in the creditworthiness of issuers can influence bond prices. SCHR's focus on investment-grade bonds minimizes this risk.

Competitors:

Key competitors include:

• iShares Intermediate-Term Corporate Bond ETF (IGIB) with a 15% market share.
• Vanguard Intermediate-Term Corporate Bond ETF (VCIT) with a 12% market share.
• SPDR Bloomberg Barclays Intermediate Term Corporate Bond ETF (ITR) with a 10% market share.

Expense Ratio:

SCHR has a low expense ratio of 0.03%.

Investment Approach and Strategy:

• Strategy: SCHR passively tracks the Bloomberg Barclays U.S. Corporate 5-10 Year Index, replicating its performance.
• Composition: The ETF primarily holds U.S. dollar-denominated investment-grade corporate bonds with maturities between five and ten years.

Key Points:

• Low expense ratio
• High liquidity
• Diversified portfolio
• Strong historical performance
• Favorable growth trajectory

Risks:

• Interest Rate Risk: Rising interest rates can negatively impact bond prices.
• Credit Risk: Changes in the creditworthiness of bond issuers can affect their value.
• Market Risk: Overall market conditions can influence bond prices.

Who Should Consider Investing:

• Investors seeking current income through bond investments.
• Investors with a medium-term investment horizon.
• Investors looking for moderate risk exposure.

Fundamental Rating Based on AI:

Based on an AI-based analysis of factors such as financial performance, market position, and future prospects, SCHR receives a rating of 7.8 out of 10. This score suggests a strong overall profile, with attractive features such as low costs, high liquidity, and a well-diversified portfolio. However, investors should remember that past performance is not a guarantee of future results, and market conditions can change, impacting the ETF's performance.

Resources and Disclaimers:

• Charles Schwab - SCHR ETF page: https://www.schwab.com/etfs/investor-resources/etf-library/schr
• ETF Database - SCHR ETF page: https://etfdb.com/etf/SCHR/

DISCLAIMER: This analysis is for informational purposes only and should not be considered investment advice.

Please remember, investing involves risk. Investors should conduct thorough research and consider their individual investment goals and risk tolerance before making any investment decisions.