Let's say I have a bank savings account giving this interest:

  • Rate: 1.736%
  • APY: 1.75% (rate accounting for compounding interest)

And there's a bond ETF SCHZ with these rates:

  • TTM: Distribution Yield Trailing 12 Month: 2.6%
  • SEC Yield 30 day: 3.08%
  • Net Expense Ratio: 0.04%

I don't want to lose money due to inflation, so I want to move money from the bank into the bond fund. I'm hesitant to invest in domestic equity funds because we're close to the end of the bull market. How do I decide on whether a particular bond fund is better than the bank savings account?

  1. For the bank, do I look at the rate or the APY? The underlying concern is APY accounts for compounding interest, but do the ETF numbers account for it? I need to compare apples to apples.
  2. For the bond ETF Do I look at the TTM or the SEC? From my understanding, the SEC is more accurate to what has been happening recently, while the TTM is what is been happening for the long haul. Which one is a fairer comparison with the bank number? To add to the complication, the bank percentage sometimes changes a few times year.
  3. After I figure out #1 and #2, do I simply compare the two numbers? Let's say the correct choice is to compare Rate with TTM. 1.736% < 2.6%. I go with the bigger number, which is the bond ETF.
  4. Is there a difference in how bank interest is taxed and how the bond ETF is taxed? I'm in the USA, if that matters. If they were taxed at different rates, I need to do some multiplication to compare the "bring home money".

1 Answer 1


1) For deciding which to use, the APY is probably the better number. For calculating whether or not you received the right amount from the bank today, the rate is the useful number.

2) You are correct that the SEC yield reflects more recent results than the TTM. Like the bank rate, these will also change frequently as the portfolio adjusts each day.

3) There are a couple reasons why choosing whichever one offers the highest yield may not be the best choice.

Risk: The savings account is likely FDIC insured while SCHZ can fall in value. Take a look at the history here.

Fees and Access: Your bank may limit the number of withdrawals you can take per year. You may pay transaction fees for buying and selling the ETF.

The right answer depends on your tolerance for risk and time horizon.

4) I think you'll find this page helpful.

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