Schwab Short-Term US Treasury ETF

SCHO

Market cap $11.7B

Vanguard Short-Term Treasury ETF (VGSH) and Schwab Short-Term U.S. Treasury ETF (SCHO) are both rated Buy for short-term U.S. Treasury exposure. VGSH is slightly superior due to its better liquidity, larger fund size, and higher 30-day SEC yield compared to SCHO. Both ETFs offer low expense ratios, minimal volatility, and are well-positioned for the current uncertain interest rate environment.

Schwab Short-Term U.S. Treasury ETF offers short-duration Treasury exposure but faces a shifting macro environment as rate cuts accelerate. It has underperformed intermediate and long-duration peers this year, reflecting changing rate expectations and narrowing yield advantages for short maturities. Persistent inflation and a weakening labor market are prompting the Fed to shift priorities, likely resulting in faster rate cuts and reduced SCHO income potential.

Bond ETFs like SGOV and SCHO gain traction as Treasury yields sink to three-year lows, reflecting rising investor caution amid mounting market stress.

SCHO offers a compelling short-term Treasury exposure with enough rate sensitivity for tactical positioning amid evolving Fed policy. Wage-price spiral risks remain low, and labor market dynamics suggest limited inflation transmission, supporting a constructive duration outlook. Recent economic data and Powell's policy openness favor increasing bets on a cut. There doesn't seem to be a lot of concern around the latest inflation reading.

SCHO offers stability and low costs but faces yield curve headwinds, making it less attractive than ultrashort or long-duration Treasuries for income. The Fed is expected to cut rates later in 2025, which could favor long-duration Treasuries over short-term strategies like SCHO for higher yields. SCHO's recent distribution declines and moderate yield highlight its limited income potential compared to long-duration alternatives, such as SCHQ.

Earlier in May, VettaFi hosted an Income Investment Strategy Symposium. Many of the experts we talked to highlighted ETFs and we partially marketed the event on this website with “ETF” in the name.

In this article, I present 10 attractive high-yield investment options for this month of May 2025, which not only offer dividend income but also potential for dividend growth. The selection process involves analyzing financial ratios, competitive advantages, valuations, and diversification across industries and countries to minimize risks and maximize returns. Highlighted top picks for May 2025 include VICI Properties, Chevron, Canadian Natural Resources, Pfizer, Altria, CVS Health, Toronto-Dominion Bank, Comcast, Vale, and Ares Capital.

The acquisitions of Alexandria Real Estate and Unilever enhance sector and geographical diversification, increase dividend income capacity, and reduce portfolio volatility, aligning with The Dividend Income Accelerator Portfolio's goals. Alexandria Real Estate offers a strong Dividend Yield [FWD] of 7.16%, robust financials, and is undervalued, making it a strategic addition to our portfolio. Unilever's fair Valuation and low 24M Beta Factor of 0.11 further reduce portfolio volatility and enhance risk-adjusted returns.

One of the problems that people have when it comes to investing is the belief that they know more than they actually know. This self-confidence isn't bad, per se, but when it comes to investing, it can lead them astray.

Short-term bond ETFs are a reliable, easily accessible option for parking cash during market turbulence. I give the Schwab Short-Term U.S. Treasury ETF  a "Buy" rating, despite strong competition in short-term bond ETFs. Investors should also consider other short-term bond ETF options mentioned in the article to make an informed investment decision.