You’ve seen the headlines about "risk-free" money. Usually, that’s a marketing gimmick, but when you're talking about the Schwab Short-Term U.S. Treasury ETF (SCHO), it's about as close as you can get to the real thing without burying gold in your backyard.
Most people treat their brokerage account's cash sweep like a dusty attic—they just leave it there and forget about it. But if you’re looking at the current 2026 landscape, where inflation is hovering around 3% and the Fed is playing a high-stakes game of "will-they-won't-they" with rate cuts, sitting on idle cash is basically a slow-motion robbery of your purchasing power.
That’s where SCHO comes in.
It isn't a "get rich quick" scheme. It’s a "don't get poor slowly" strategy. Specifically, this ETF focuses on U.S. Treasury notes with maturities between one and three years. It’s the financial equivalent of a sturdy pair of work boots: not flashy, but they’ll get you through the mud when the stock market starts acting like a toddler on a sugar crash.
Why SCHO Is the "Boring" Hero of Your Portfolio
Honestly, the Schwab Short-Term U.S. Treasury ETF is built for the investor who hates surprises. While tech stocks are swinging 5% in a single afternoon because of a CEO’s tweet, SCHO is over in the corner, quietly tracking the Bloomberg US Treasury 1-3 Year Index.
As of early 2026, the fund has about $11.7 billion in assets. That’s a massive pile of safety. Because it holds actual government debt, the credit risk is virtually zero—unless the U.S. government stops existing, at which point your ETF balance will be the least of your problems.
The real magic is in the expense ratio.
At a measly 0.03%, it is one of the cheapest ways to own Treasuries. To put that in perspective, for every $10,000 you invest, Schwab is only taking $3 a year to keep the lights on. Compare that to some actively managed bond funds that charge 0.50% or more, and you're essentially keeping more of your yield for doing absolutely nothing.
The 2026 Yield Reality
We’re currently seeing a 30-day SEC yield around 3.50%. Is that going to fund a yacht? No. But it beats the pants off a traditional savings account that might still be offering you 0.01% because they think you aren't paying attention.
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One thing people often overlook is the tax side. Interest from U.S. Treasuries is generally exempt from state and local taxes. If you live in a high-tax state like California or New York, that 3.50% yield actually "feels" more like 4% or higher when you compare it to a corporate bond fund where the tax man takes a bigger bite.
Understanding Interest Rate Sensitivity (The Duration Trap)
Duration is a word that makes most people’s eyes glaze over, but you need to understand it if you're buying the Schwab Short-Term U.S. Treasury ETF.
Basically, duration measures how much the price of your ETF will drop if interest rates go up. Because SCHO only holds bonds that mature in 1 to 3 years, its duration is very low—usually around 1.8 to 1.9 years.
If interest rates jump by 1%, the value of the ETF might dip by about 1.9%. That’s a tiny speed bump. Now, compare that to a long-term Treasury ETF (like TLT), which has a duration closer to 16 or 17 years. If rates jump 1% there, you’re looking at a 17% loss.
That is a huge difference.
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SCHO is designed to be a "buffer." It’s where you put money you might need in a year or two—maybe for a house down payment or a wedding—but you want it to earn more than a piggy bank in the meantime.
Why Not Just Use a Money Market Fund?
This is a fair question. Money market funds are great. They try to keep a stable $1.00 share price. SCHO, however, is an ETF. Its price fluctuates.
Today, it might be $24.37. Tomorrow, it might be $24.35.
The trade-off is that SCHO typically offers a slightly higher yield than a standard money market fund because you’re willing to take that tiny bit of "price risk" by holding bonds that last longer than 90 days. In the current 2026 environment, where the yield curve is still somewhat weird and flat, the "extra" return you get for moving from a money market to a 1-3 year Treasury fund is often worth the very minor price movement.
Real World Performance and Risks
Let's look at the numbers. Over the last year, SCHO has delivered a total return of about 5.14%. In a world where the S&P 500 has been volatile, that’s a rock-solid anchor.
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But it isn't perfect.
Inflation is the biggest enemy here. If the 30-day SEC yield is 3.50% and inflation is 3.10%, your "real" return is only 0.40%. You’re barely treading water. If inflation spikes to 5%, you’re actually losing money in terms of what that cash can actually buy at the grocery store.
Also, don't expect capital appreciation. You aren't buying this because you think the price will go from $24 to $50. It’s a yield play, period.
Actionable Steps for 2026 Investors
If you're sitting on a pile of cash and you're tired of getting nothing for it, here is how to actually use the Schwab Short-Term U.S. Treasury ETF effectively:
- Check your "Cash Drag": Look at your brokerage account. If you have more than $5,000 sitting in a "sweep" account earning less than 1%, move it. Even if you only move half into SCHO, you're giving yourself an immediate raise.
- Laddering Strategy: Don't dump everything into one bucket. Many experts suggest using SCHO as the "short" end of a bond ladder. You keep some in SCHO for the 1-3 year window and maybe some in intermediate Treasuries (like SCHR) for the 5-10 year window.
- Automate the Dividends: SCHO pays out monthly. Set your account to "DRIP" (Dividend Reinvestment Plan). By automatically buying more shares every month with the interest, you're compounding that safety net without even thinking about it.
- Watch the Fed: If the Federal Reserve starts aggressively cutting rates later in 2026, the yield on new Treasuries will drop. Buying now locks in the current yields of the bonds already in the portfolio for a short while, giving you a slight edge over people who wait.
The bottom line is that the Schwab Short-Term U.S. Treasury ETF isn't going to make you a millionaire overnight. It’s a defensive tool. In a market that feels increasingly unstable, having a low-cost, tax-efficient place to park your "must-have" money is just smart math. You’re trading high-risk volatility for predictable, government-backed income. Sometimes, being "boring" is the most aggressive move you can make.