SCHP vs VTIP: one holds the curve, one hides from it

Both are cheap, well-run TIPS index funds. The entire difference is duration: SCHP owns the whole maturity spectrum, VTIP owns only bonds inside five years. In 2022 that one difference was worth nine percentage points.

Side by side

2022 returns computed from dividend-adjusted closing prices; expense ratios as published by the fund sponsors, worth re-checking on the fund pages.

What 2022 proved

Every bond inside both funds kept its inflation guarantee in 2022, and both funds still fell, because real yields rose about four points off the 2021 floor and bond prices move opposite yields in proportion to duration. SCHP's six-plus years of duration turned that repricing into a 12% loss during the worst inflation in four decades. VTIP's two and a half years turned the same move into a 3% dip, and its heavy weighting to imminent inflation accruals let it capture realized CPI almost directly.

Which one, for which job

VTIP is the better inflation tracker for money with a short horizon: cash-adjacent reserves, next-few-years spending, the inflation sleeve of a conservative portfolio. SCHP is the better long-run real-return engine precisely because it carries real-yield duration; buying it near historically high real yields means that duration works for you rather than against you, and it pays more when the curve is upward sloping.

Neither one can do what a ladder does. A fund never matures, so it never hands back a known real sum on a known date, which is the entire requirement of retirement income planning. The full argument is in funds vs individual TIPS; the short version is that funds hedge inflation while ladders fund liabilities.