SCHD vs. VTI: Which is Best For You?

SCHD and VTI are two popular ETFs to use as a long-term investment.

There’s no straight shot to identifying which one’s better because it largely depends on your investment objectives.

Understanding SCHD vs. VTI - Key Characteristics

SCHD pays a higher dividend yield than VTI
SCHD holds 100 stocks, while VTI holds over 3,500

VTI: A Total Market Open-Book

VTI, managed by Vanguard, places you in the driver’s seat of the entire U.S. stock market. Backed by an incredibly diversified holdings of over 3500 U.S. stocks, this ETF literally has its fingers in every pie.

As you guessed, it’s a fan-favorite among investors who want extensive exposure to the U.S. stock market in all its glory, ranging from large-cap to small-cap companies.

SCHD: A Dividend Fan’s Paradise

SCHD, managed by Charles Schwab, is a dividend-oriented ETF. With a portfolio of around 100 high dividend-yielding U.S. stocks, SCHD is an alley for investors who prioritize stable income above everything else.

SCHD vs. VTI: What Sets Them Apart?

SCHD has a higher expense ratio
VTI holds more companies

Expense Ratio Comparison: SCHD vs. VTI

SCHD - 0.06%
VTI - 0.03%

When it comes to the cost of investing, both ETFs boast low expense ratios due to their passive management. VTI comes with an expense ratio of merely 0.03% — a testament to Vanguard’s cost-effective investment approach.

On the other hand, SCHD has an expense ratio of 0.06%. Although twice the expense ratio of VTI, it’s still commendably low on the ETF market radar.

Dividends: SCHD vs. VTI

SCHD - 3.67%
VTI - 1.59%

A glance at the dividend yields of both ETFs unveils stark differences. SCHD, the high-yield champion, sports a dividend yield of around 3.67%.

Comparatively, VTI provides a modest yield of about 1.59%, just a shade below the S&P 500 benchmark.

For investors seeking higher income flow, SCHD evidently takes the cake.

Digging Into The Holdings: SCHD vs. VTI

VTI, being a total market ETF, leans heavily towards tech stocks. Tech companies form about a quarter of its holdings, followed by significant allocations in consumer discretionary, financials, healthcare, and industrials.

SCHD exhibits a more balanced sector allocation due to its dividend-oriented strategy. Its top sectors include financials and technology, followed by a strong positioning in consumer staples.

Unveiling the Returns: SCHD vs. VTI

When it comes to historical performance, VTI takes the crown, even with dividends reinvested.

Another key point to note is that in a taxable account, you may have to pay more taxes since you receive more dividend income.

Making the Right Choice: SCHD vs. VTI

If you lean towards the predictable nature of dividends, SCHD could be your go-to ETF. It provides a generous yield compared to the broader market, carefully curated in a sustainable portfolio. SCHD could also be a wise choice against a backdrop of inflation or market volatility.

On the other hand, VTI, with its sprawling diversification and ultra-low-cost, offers a strategic investment footing for long-term buy-and-hold investors. However, VTI feeds substantially on economic growth, making it vulnerable during economic downturns.

As always, a well-balanced investment strategy could involve holding both. Actual allocation would depend on your financial goals, income needs, and risk appetite.