VOO vs SCHD: What’s the Difference?LAST UPDATED: July 18, 2023 | By Conrad Golly
As an investor, I am always looking for ways to maximize my returns while minimizing risk. One way to achieve this is by investing in exchange-traded funds (ETFs). Two popular ETFs in the market are VOO and SCHD.
While both are designed to track the performance of the U.S. stock market, they differ in their investment strategies and underlying holdings. VOO vs SCHD: VOO is offered by Vanguard and tracks the performance of the S&P 500, which is made up of 500 large-cap U.S. companies. It is a great option for investors who want to invest in the U.S. stock market as a whole.
SCHD, on the other hand, is offered by Charles Schwab and focuses on high-quality U.S. companies with a history of consistent dividend payments. It is designed to provide investors with a steady stream of income through dividends. By the end of this article, you will have a better understanding of which ETF may be a better fit for your investment goals and risk tolerance.
What is the Difference between VOO vs SCHD?
As a passive investor, I am always looking for the best ETF that tracks the performance of an index as closely as possible. The question is should you invest into SCHD or VOO?
These ETFs are different, including their makeup, index, growth aspects, dividend, and even history. SCHD vs VOO: Which ETF should you choose? While both ETFs are passively managed, there are some key differences between them.
Table of Top 10 VOO Holdings
To start, let’s take a look at the top 10 holdings of VOO. As an S&P 500 index fund, VOO invests in the 500 largest publicly traded companies in the United States.
According to Vanguard’s website, the top 10 holdings of VOO are:
|Facebook Inc. Class A||FB||2.2%|
|Alphabet Inc. Class A||GOOGL||1.9%|
|Alphabet Inc. Class C||GOOG||1.9%|
|Berkshire Hathaway Inc. Class B||BRK.B||1.8%|
|Johnson & Johnson||JNJ||1.6%|
|Procter & Gamble Co.||PG||1.5%|
|JPMorgan Chase & Co.||JPM||1.4%|
Table of Top 10 SCHD Holdings
Now, let’s take a look at the top 10 holdings of SCHD. As a dividend-focused ETF, SCHD invests in companies that have a consistent history of paying dividends. According to Charles Schwab’s website, the top 10 holdings of SCHD were:
|Johnson & Johnson||JNJ||3.45%|
|JPMorgan Chase & Co.||JPM||2.91%|
|Procter & Gamble Company||PG||2.79%|
|Verizon Communications Inc.||VZ||2.70%|
Investment Strategy VOO vs SCHD
VOO Investment Strategy
When it comes to investment strategy, VOO focuses on tracking the performance of the S&P 500 Index, which is a market-capitalization-weighted index of 500 large-cap US companies.
The index is designed to be a broad representation of the US equity market, covering industries such as technology, healthcare, financials, and more. By investing in VOO, investors gain exposure to a diversified portfolio of large-cap US stocks.
SCHD Investment Strategy
SCHD, on the other hand, focuses on tracking the performance of the Dow Jones U.S. Dividend 100 Index.
This index is made up of 100 high dividend yielding US stocks, with a focus on large-cap companies. SCHD aims to provide investors with exposure to high-quality US stocks that have a history of paying consistent dividends.
By investing in SCHD, investors can potentially benefit from both capital appreciation and dividend income. While both VOO and SCHD are passively managed ETFs, their investment strategies differ significantly.
VOO aims to provide investors with broad-based exposure to the US equity market, while SCHD focuses on high dividend yielding stocks.
When it comes to expense ratios, VOO has a significantly lower expense ratio than SCHD. This may be a factor to consider when deciding between the two ETFs.
The choice between VOO and SCHD will depend on an investor’s individual investment goals and risk tolerance. It may be helpful to compare the performance, riskiness, drawdowns, and other indicators of both ETFs before making a decision.
Performance Comparison VOO vs SCHD
When it comes to comparing SCHD and VOO, one of the most important factors to consider is their performance. Both ETFs are designed to track the performance of different indexes, and as such, they have different performance records.
SCHD has a total return of 298.09% since October 2, 2022, while VOO has a total return of 305.13% over the same period. It’s worth noting that SCHD has a higher expense ratio than VOO, which can eat into returns over time.
Another important factor to consider when comparing the performance of these two ETFs is their level of risk.
SCHD tends to be less volatile than VOO, in part because it focuses on dividend-paying stocks. This can make it a good choice for investors who are looking for a more conservative investment option.
On the other hand, VOO is designed to track the performance of the S&P 500, which is made up of some of the largest and most well-known companies in the world. This means that it can be more volatile than SCHD, but it also has the potential to deliver higher returns over the long term.
The choice between SCHD and VOO will depend on your individual investment goals and risk tolerance. If you’re looking for a more conservative investment option that focuses on dividend-paying stocks, SCHD may be the better choice.
But if you’re willing to take on more risk in exchange for the potential for higher returns, VOO may be the way to go.
Expense Ratio Comparison VOO vs SCHD
When it comes to expense ratios, SCHD and VOO have some key differences. SCHD has a higher expense ratio of 0.06%, while VOO’s expense ratio is only 0.03%.
This means that VOO is cheaper to own than SCHD. However, it’s important to note that expense ratios are not the only factor to consider when choosing an ETF. You also need to take into account the performance of the fund, the underlying index it tracks, and your own investment goals and risk tolerance.
If you’re looking for an ETF that tracks the S&P 500 and has a low expense ratio, VOO might be a good choice. On the other hand, if you’re looking for an ETF that focuses on dividend-paying stocks and has a slightly higher expense ratio, SCHD might be a better fit for your portfolio.
The decision between SCHD and VOO comes down to your personal investment goals and risk tolerance.
It’s important to do your own research and consult with a financial advisor before making any investment decisions. Here’s a quick summary of the key differences between SCHD and VOO’s expense ratios:
As you can see, VOO has a significantly lower expense ratio than SCHD. However, it’s important to consider other factors as well, such as the underlying index and historical performance of the fund.
Dividend Yield Comparison VOO vs SCHD
When it comes to dividend yield, SCHD and VOO have different values. As of 2/17/2023, SCHD’s dividend yield is 3.33%, which is significantly higher than VOO’s current dividend yield of -4.54%.
It’s important to note that VOO’s current dividend yield is negative, which means that the fund is not paying out dividends at the moment.
However, VOO’s 10-year average dividend yield is 1.64%, which is lower than SCHD’s current dividend yield but still a positive value. In terms of dividend growth, both SCHD and VOO have shown consistent growth over the years.
SCHD has increased its dividend payout every year since its inception in 2011, while VOO has increased its dividend payout for the past 10 consecutive years. When it comes to expense ratio, VOO has a lower expense ratio of 0.03% compared to SCHD’s 0.06%.
This means that VOO is generally cheaper to own than SCHD. Overall, when it comes to dividend yield, SCHD is the clear winner with its higher current yield. It’s important to consider other factors such as expense ratio and dividend growth when deciding which ETF is better suited for your portfolio.
SCHD vs VOO: Which One Should You Choose?
When it comes to choosing between SCHD and VOO, it ultimately depends on your investment goals and risk tolerance.
Here are some key factors to consider:
Expense Ratio SCHD has a slightly higher expense ratio of 0.06%, compared to VOO’s 0.03%. While this may not seem like a significant difference, it can add up over time and impact your overall returns.
Index Tracked SCHD tracks the Dow Jones U.S. Dividend 100 Index, which focuses on high-quality dividend-paying stocks. VOO, on the other hand, tracks the S&P 500 Index, which includes 500 of the largest publicly traded companies in the U.S. across various sectors.
If you’re looking for exposure to dividend-paying stocks, SCHD may be a better fit. However, if you want broad exposure to the U.S. stock market, VOO may be a better option.
Performance Over the past 10 years, SCHD has slightly outperformed VOO when accounting for both dividends and share growth. However, past performance is not a guarantee of future results. It’s important to consider the long-term outlook for both funds and their underlying holdings.
Risk Both SCHD vs VOO are relatively low-risk investments, as they are passively managed and aim to replicate the performance of their respective indexes. However, it’s important to remember that all investments come with some degree of risk. It’s important to assess your risk tolerance and diversify your portfolio accordingly.
FAQs: VOO vs SCHD
What ETF Is Better Than SCHD?
When it comes to choosing between SCHD and other ETFs, it really depends on your investment goals and risk tolerance. SCHD is a dividend-focused ETF, which means it may be a good choice for investors looking for regular income.
If you’re looking for broader exposure to the overall U.S. stock market, VOO may be a better choice.
Is SCHD A Good Long Term Investment?
SCHD is designed to provide long-term growth and income, making it a potentially good investment for those with a long-term investment horizon.
Like any investment, there are risks involved, so it’s important to do your own research and consult with a financial advisor before making any investment decisions.
Is SCHD Better Than SPY?
SPY is an ETF that tracks the performance of the S&P 500 Index, just like VOO. While SCHD and SPY both provide exposure to the U.S. stock market, they have different investment objectives.
SCHD is focused on dividend-paying stocks, while SPY aims to replicate the performance of the S&P 500 Index as closely as possible.
The choice between SCHD and SPY will depend on your investment goals and risk tolerance.