VOO vs. SCHD: A Comprehensive Comparison
SCHD and VOO are two of the most popular ETFs amongst long-term investors.
In this guide, we’ll take a comprehensive comparison of VOO vs SCHD to help you determine which is best for your portfolio!
Key Characteristics
VOO tracks the top 500 U.S. large-cap companies
SCHD tracks 100 high dividend-paying companies
VOO has a lower expense ratio than SCHD
SCHD pays a higher dividend yield than VOO
Key Characteristics of VOO
VOO aims to track the S&P 500, which is comprised of 500 large-cap U.S. companies which captures around 80% of the total market capitalization.
This passively managed ETF gives you widespread exposure to a multitude of U.S. sectors, with higher allocations to the Technology and Financial sectors.
Key Characteristics of SCHD
SCHD, or Schwab U.S. Dividend Equity ETF, distinguishes itself by tracking the Dow Jones U.S. Dividend 100 Index.
This index focuses on high dividend-paying U.S. stocks, resulting in an ETF with a potentially higher yield than those tracking broader market indexes.
SCHD’s allocations lean towards Defensive sectors like Consumer Staples, Healthcare, and Industrials.
Performance Comparison
Over long periods of time, VOO should outperform as it isn’t solely focusing on less volatility dividend companies.
However, during periods when the market is going sideways to down, SCHD will likely outperform VOO.
VOO Performance
The performance of VOO generally emulates that of the broader U.S. stock market, reflecting the highs and lows of the S&P 500 Index.
VOO might display aggressive growth in bull markets, particularly during tech-centric booms, but may also see significant declines during market crashes.
SCHD Performance
SCHD’s performance relies heavily on dividend-paying U.S. companies, particularly aside from Tech titans.
This investment focus delivers a more defensive performance, potentially outpacing during bear markets or slower economic periods where high-dividend stocks may provide a cushion.
However, it may underperform VOO during tech-leveraged bull runs.
VOO vs. SCHD Dividend Comparison
SCHD has a dividend yield of 3.78%, while VOO has a dividend yield of around 1.48%.
SCHD clearly emerges as the higher-income-generating ETF but with less capital growth potential.
VOO vs. SCHD Expense Ratio Comparison
VOO - 0.03%
SCHD 0.06%
The expense ratio, or the cost of managing the ETF, is another crucial factor to consider. Both VOO and SCHD boast low expense ratios - 0.03% and 0.06%, respectively.
The marginal difference might not significantly impact your returns but could accumulate consequential effects over the long term.
Which is the Better Buy?
For investors valuing growth and wide market exposure, VOO could be an apt choice, especially for betting on tech influx.
Conversely, SCHD affords a more defensive play, valuable for those prioritizing dividends and comparatively stable growth.
Both ETFs hold their unique attributes and potential competitive edge under diverse conditions, and hence, thoughtfully blending both in your portfolio could be a tactful strategy for balanced growth and stability.
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FAQ
Should I invest in both SCHD and VOO?
Investing in both SCHD and VOO could offer a well-rounded portfolio that capitalizes on the benefits of both ETFs. While VOO represents the broader market, SCHD focuses on strong dividend-paying companies. This balanced approach caters to investors seeking growth (through VOO) while also desiring stable income (via SCHD’s dividends).
Does VOO and SCHD overlap?
Both ETFs invest in U.S. companies, but their strategies differ. While some overlap exists in companies they invest in, their distribution of investments is quite diverse. VOO tracks the S&P 500 index, yielding a wide exposure across various sectors. Conversely, SCHD purposely invests in companies with appealing dividend yields, leading to a more sector-specific distribution.
