Schwab 5-10 Year Corporate Bond ETF (SCHI) seeks to track the Bloomberg U.S. Intermediate Corporate Bond Index, which measures the performance of investment-grade corporate bonds issued by U.S. and foreign companies with maturities between 5-10 years. This intermediate-term fixed income ETF provides exposure to corporate credit risk while targeting moderate interest rate sensitivity.
How It Works
SCHI uses a passively managed, market-value-weighted approach that holds corporate bonds in proportion to their outstanding debt amounts. The fund maintains an average duration of approximately 6-7 years and focuses exclusively on investment-grade corporate bonds rated BBB- or higher by major rating agencies. Rebalancing occurs monthly to maintain duration targets and replace maturing bonds. Holdings typically include 1,000+ corporate bonds from diverse sectors including financials, industrials, and utilities.
Key Features
- Zero expense ratio makes it one of the lowest-cost corporate bond ETFs available, saving investors significant fees over time
- Intermediate 5-10 year duration sweet spot balances yield generation with manageable interest rate sensitivity compared to longer-term bonds
- 4.20% dividend yield provides attractive current income while maintaining investment-grade credit quality standards throughout the portfolio
Risks
- This ETF loses value when interest rates rise, with potential 5-8% declines for each 1% rate increase due to 6-7 year average duration
- Corporate credit spreads widening during economic stress can cause additional losses beyond interest rate moves, particularly affecting lower-rated BBB bonds
- Rising rate environments and corporate credit deterioration can create double impact, as seen when corporate bonds underperformed Treasuries during Fed tightening cycles
Who Should Own This
Best suited for conservative to moderate investors seeking steady income with 3-7 year time horizons and low-to-medium risk tolerance. Works well as core fixed income allocation (20-40% of portfolio) for investors wanting corporate yield pickup over government bonds. Ideal for retirement income strategies or portfolio diversification away from equities.