SCHB vs. VTI - Which is Best For You?
Instead of picking individual stocks, investing in ETFs lets you buy a “basket” of stocks mirroring a particular index.
Today, let’s investigate two such prominent U.S. equity ETFs: The Charles Schwab U.S. Broad Market ETF (SCHB) and Vanguard’s Total Stock Market ETF (VTI).
SCHB vs. VTI: Overview
SCHB and VTI are widely acclaimed as two of the most substantial ETFs for U.S. equity exposure, with their subtle differences hinging on the index they track, number of holdings, expense ratio, performance, and dividend yield.
SCHB vs. VTI: Expense Ratio
Both SCHB and VTI boast low expense ratios of 0.03%.
The expense ratio represents the annual fee that ETFs charge their shareholders. It significantly impacts the returns on your investment over time.
SCHB vs. VTI: Dividend Yield
SCHB shows an annual dividend yield of 1.50%, while VTI exposes a slightly higher yield at 1.59%.
Looking at dividend payments is essential, but both of these funds have a nearly identical dividend yield, making it a less important factor to consider.
SCHB vs. VTI: Number of Holdings
In terms of total holdings, VTI takes the pie, encapsulating about 3,800 stocks compared to SCHB’s 2,500.
Adhering to the idiom, “Don’t put all your eggs in one basket,” having more holdings could potentially imply better diversification.
SCHB vs. VTI: Performance Comparison
SCHB and VTI are both total stock market ETFs that have performed nearly identically. The only difference is VTI holds more stocks, but this has not made it perform differently from SCHB.
Keep in mind that while numbers are essential, they do not tell the entire story. The performance of these ETFs is determined not only by the characteristics inherent to them but also heavily leans on the market conditions.
SCHB vs. VTI: Which is Better For You?
The truth is, there’s no universal ‘better’ option. Whether SCHB or VTI would serve you well depends very much on your investment objectives, risk tolerance, and strategies.
Your returns will not be much different regardless of which you choose, so investing in either of these ETFs will be a good choice.
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Before making any investment, it’s crucial to do diligence and understand your risk appetite, time horizon, and financial goals. Ensuring these align with your selected ETF will be pivotal to a successful, long-term investment journey.
FAQs
Is SCHB better than SPY?
The answer to that depends on your investment objectives. SPY follows the S&P 500 index, which consists of 500 of the largest U.S. companies. SCHB, on the other hand, tracks a broader U.S. market. For broad market exposure, SCHB may be a better choice. However, if your aim is to align with the large-cap U.S. equities, SPY could be more suitable.
Is SCHB better than SCHD?
While SCHB gives you broad exposure to the whole U.S. stock market, SCHD is designed for income investors, focusing on high dividend-yielding US large-cap stocks. If you’re seeking potentially higher dividends and are comfortable with the risks of concentrating on high-yield stocks, SCHD might be the better choice.
