VGT vs SCHD: Understanding the Key Differences
LAST UPDATED: April 14, 2023 | By Conrad Golly
As an investor, I am always looking for the best funds to invest in. Recently, I came across two popular funds: VGT and SCHD.
Both funds have been gaining popularity among investors, but what’s the difference between them?
VGT is a Vanguard Technology fund, while SCHD is a Schwab ETFs Large Value fund. Both funds have their own unique characteristics, which makes it difficult to choose between them.
VGT vs SCHD: The expense ratio of VGT is 0.04 percentage points higher than SCHD’s (0.1% vs. 0.06%). VGT also has a higher exposure to the technology sector, while SCHD focuses on large value stocks. These differences can have a significant impact on the performance of the funds.
So, which fund is better? It ultimately depends on your investment goals and risk tolerance.
In the following sections, we will analyze the key differences between VGT and SCHD, including their performance, expense ratios, holdings, and more.
By the end of this article, you will have a better understanding of which fund is right for you.
Table of Contents
VGT vs SCHD: Overview
As I compare VGT vs SCHD, it’s important to note that they are two distinct exchange-traded funds (ETFs) with different investment objectives.
VGT, or the Vanguard Information Technology Index Fund ETF, aims to track the performance of the MSCI US Investable Market Information Technology 25/50 Index, which includes large, mid, and small-cap information technology stocks.
SCHD, or the Schwab U.S. Dividend Equity ETF, seeks to track the performance of the Dow Jones U.S. Dividend 100 Index, which includes high dividend yielding U.S. companies.
One key difference between VGT and SCHD is their sector allocation.
As of the current date, VGT is heavily weighted towards the technology sector, with over 70% of its assets invested in technology stocks.
On the other hand, SCHD has a more balanced sector allocation, with its top sectors being financials, consumer staples, and industrials.
Another difference between VGT and SCHD is their dividend yield. SCHD has a higher dividend yield compared to VGT, which is expected given its investment objective.
As of the current date, SCHD has a dividend yield of 2.97%, while VGT has a dividend yield of 0.53%.
When it comes to performance, VGT has outperformed SCHD over the past year, with a return of 62.25% compared to SCHD’s return of 41.63%.
However, it’s important to keep in mind that past performance does not guarantee future results.
In summary, VGT and SCHD are two different ETFs with different investment objectives.
VGT is heavily weighted towards the technology sector and has a lower dividend yield, while SCHD has a more balanced sector allocation and a higher dividend yield.
When deciding between the two, it’s important to consider your investment goals and risk tolerance.
VGT: Vanguard Information Technology ETF
What is VGT?
VGT is an ETF (exchange-traded fund) that invests in companies in the technology sector. It is managed by Vanguard, one of the largest investment companies in the world.
VGT tracks the performance of the MSCI US Investable Market Information Technology 25/50 Index, which includes companies in the technology sector such as Apple, Microsoft, and Intel.
VGT: Key Features
VGT has several key features that make it an attractive investment option for those looking to invest in the technology sector.
Some of the key features of VGT include:
- Low expense ratio: VGT has a low expense ratio of 0.10%, which is lower than the average expense ratio for ETFs.
- Diversification: VGT invests in a diversified portfolio of companies in the technology sector, which helps to reduce risk.
- Liquidity: VGT is a highly liquid ETF, which means that it is easy to buy and sell shares.
- Performance: VGT has a strong track record of performance, with an average annual return of over 20% over the past five years.
VGT: Pros and Cons
Like any investment, VGT has both pros and cons.
Some of the pros of investing in VGT include:
- Exposure to the technology sector: Investing in VGT gives investors exposure to some of the biggest and most innovative companies in the technology sector.
- Low expense ratio: VGT has a low expense ratio, which means that investors can keep more of their returns.
- Diversification: VGT invests in a diversified portfolio of companies in the technology sector, which helps to reduce risk.
However, there are also some cons to investing in VGT, including:
- Risk: Investing in VGT carries risk, as the technology sector can be volatile and subject to rapid changes.
- Concentration: VGT invests heavily in the technology sector, which means that it is not a diversified investment option.
- No dividends: VGT does not pay dividends, which may be a drawback for some investors.
SCHD: Schwab U.S. Dividend Equity ETF
What is SCHD?
I have been doing some research on SCHD, which stands for Schwab U.S. Dividend Equity ETF.
This ETF is designed to track the Dow Jones U.S. Dividend 100 Index, which is made up of 100 high dividend yielding U.S. stocks.
SCHD is a popular choice for investors who are looking for a consistent stream of income from their investments.
SCHD: Key Features
SCHD has a number of key features that make it an attractive investment option for many investors. One of the main features is its low expense ratio, which is currently at 0.06%.
This means that investors can keep more of their returns, as they are not paying high fees to manage their investments.
Another key feature of SCHD is its focus on dividend-paying stocks.
This means that investors can expect a consistent stream of income from their investments, which can be particularly useful for those who are looking to supplement their retirement income.
SCHD: Pros and Cons
As with any investment, there are both pros and cons to consider when investing in SCHD.
Some of the pros include its low expense ratio, its focus on dividend-paying stocks, and the fact that it has a solid track record of performance.
However, there are also some cons to consider. One potential downside of SCHD is that it may not be as diversified as some other ETFs.
This is because it is focused on a specific sector of the market (dividend-paying stocks).
While SCHD has a solid track record of performance, there is no guarantee that this will continue in the future.
SCHD is a solid investment option for those who are looking for a consistent stream of income from their investments. Its low expense ratio and focus on dividend-paying stocks make it an attractive choice for many investors.
However, it is important to carefully consider the pros and cons before investing in any ETF.
VGT vs SCHD: Comparison
VGT vs SCHD: Performance
When it comes to performance, Vanguard Information Technology Index Fund ETF (VGT) has been outperforming Schwab U.S. Dividend Equity ETF (SCHD) in recent years.
As of the current date, VGT has a mean return that is 1.76 points higher than SCHD, and its R-squared is 74.84 points higher.
However, it’s important to note that VGT is slightly more volatile than SCHD, with a standard deviation of 16.61.
VGT vs SCHD: Expense Ratio
Expense ratios are an important factor to consider when choosing between VGT and SCHD. VGT has a slightly higher expense ratio of 0.10%, while SCHD has an expense ratio of 0.06%.
This means that SCHD is slightly cheaper to hold over the long term.
VGT vs SCHD: Holdings
The holdings of VGT and SCHD are quite different from each other. VGT is a technology-focused ETF, with holdings in companies such as Apple, Microsoft, and Google parent company Alphabet.
SCHD, on the other hand, is a dividend equity ETF, with holdings in companies such as Johnson & Johnson, Procter & Gamble, and PepsiCo.
In terms of diversification, SCHD may appear to be more diversified with only 19% of its holdings in the technology sector, compared to VGT’s 36%.
However, it’s important to note that SCHD’s top 10 holdings comprise 40% of its assets, which may not be as diversified as it seems.
When comparing VGT vs SCHD, it’s important to consider your investment goals and risk tolerance. While VGT may have higher returns, it’s also more volatile and has a higher expense ratio.
SCHD, on the other hand, may be a better fit for investors looking for a more diversified portfolio with a focus on dividend-paying stocks.
Bottom Line: VGT vs SCHD
After conducting research and analyzing the data, it is clear that both VGT and SCHD have their advantages and disadvantages.
For those who are looking for a higher return and are willing to take on a slightly higher risk, VGT may be the better choice. However, if you are looking for a lower expense ratio and a more diversified portfolio, SCHD may be the way to go.
It is important to consider your own investment goals and risk tolerance when deciding between these two funds. Additionally, it may be beneficial to consult with a financial advisor before making any investment decisions.
Both VGT and SCHD have proven to be solid investment options in their respective categories. It ultimately comes down to individual preferences and investment strategies.
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