VTV vs SCHD: Understanding the Key Differences
LAST UPDATED: April 29, 2023 | By Conrad Golly
As an investor, I’m always looking for the best investment options available in the market. Two popular choices are Vanguard Value Index Fund ETF (VTV) and Schwab U.S. Dividend Equity ETF (SCHD).
These two funds are often compared and it can be challenging to determine which one is the better investment option. Both VTV vs SCHD are large-cap funds that invest in U.S. equities.
VTV tracks the performance of the MSCI US Prime Market Value Index, while SCHD tracks the performance of the Dow Jones U.S. Dividend 100 Index. While both funds have similar investment objectives, there are some key differences between them that investors should consider.
In the following paragraphs, I will delve deeper into these differences to help you make an informed decision about which fund is right for you.
Overview of VTV vs SCHD
As I compare VTV and SCHD, it’s important to start with an overview of each ETF.
What is VTV?
VTV is the Vanguard Value ETF, which is designed to track the CRSP US Large Value Index. This index includes large-cap US stocks with value characteristics, such as low price-to-earnings and price-to-book ratios.
VTV has been around since 2004 and has an expense ratio of just 0.04%, making it one of the more affordable ETFs on the market.
VTV is a popular investment choice for those looking for exposure to the value segment of the US stock market. It has a large asset base of $79 billion and provides investors with a diversified portfolio of value stocks.
What is SCHD?
SCHD is the Schwab US Dividend Equity ETF, which is designed to track the Dow Jones US Dividend 100 Index. This index includes US stocks with a history of consistent dividend payments and is weighted by dividend yield.
SCHD has been around since 2011 and has an expense ratio of 0.06%, which is still relatively low compared to other ETFs.
SCHD is a popular investment choice for those looking for exposure to dividend-paying stocks in the US stock market. It has a large asset base of $11.6 billion and provides investors with a diversified portfolio of dividend-paying stocks.
When comparing VTV and SCHD, it’s important to note that they have different investment strategies. While VTV focuses on value stocks, SCHD focuses on dividend-paying stocks. This means that their portfolios will have different sector weightings and risk profiles.
In terms of products and services, both VTV and SCHD are ETFs, which means they are traded on exchanges like stocks. They are also both offered by well-known investment management companies, Vanguard and Schwab, respectively.
VTV and SCHD are both popular investment choices for those looking for exposure to different segments of the US stock market. It’s important to consider your investment goals and risk tolerance when deciding which ETF is right for you.
Investment Strategy VTV vs SCHD
When it comes to investing in ETFs, understanding the investment strategy of a fund is crucial. In this section, I will take a closer look at the investment strategies of VTV and SCHD.
VTV’s Investment Strategy
VTV, the Vanguard Value Index Fund ETF Shares, follows an indexing investment approach designed to track the performance of the CRSP US Large Cap Value Index. This index is predominantly made up of value stocks of large U.S. companies.
The fund’s investment strategy is to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index.
As a value-oriented fund, VTV invests in companies that are considered undervalued by the market. The fund’s investment strategy is to hold stocks for the long term, with a focus on companies with strong fundamentals and attractive valuations.
SCHD’s Investment Strategy
SCHD, the Schwab U.S. Dividend Equity ETF, invests in companies that have a history of paying dividends. The fund’s investment strategy is to track the performance of the Dow Jones U.S. Dividend 100 Index, which is made up of 100 high dividend yielding U.S. stocks.
SCHD’s investment strategy is to invest in companies that have a history of paying dividends, with a focus on those that have a high dividend yield. The fund’s investment strategy is to hold these stocks for the long term, with a focus on companies with strong fundamentals and attractive valuations.
When it comes to investing in ETFs, it is important to remember that past performance is not a guarantee of future results. It is also important to consider the completeness, accuracy, and timeliness of the information provided by the fund.
Before making any investment decisions, it is always recommended to consult with a qualified broker or financial advisor.
In terms of pricing, both VTV and SCHD have relatively low expense ratios compared to other ETFs. VTV has an expense ratio of 0.04%, while SCHD has an expense ratio of 0.06%.
Both VTV and SCHD offer investors exposure to large U.S. companies with strong fundamentals and attractive valuations. However, VTV is more focused on value stocks, while SCHD is more focused on high dividend yielding stocks.
Performance Comparison VTV vs SCHD
When comparing VTV and SCHD, it’s important to consider their historical performance and risk profiles.
Historical Performance Comparison
Looking at their historical performance, over the past 10 years, VTV has underperformed SCHD with an annualized return of 10.45%, while SCHD has yielded a comparatively higher 11.88% annualized return.
In the year-to-date period, VTV achieves a -0.24% return, which is significantly lower than SCHD’s -2.15% return. This information suggests that SCHD may be a better choice for investors looking for higher returns.
Risk Comparison VTV vs SCHD
In terms of risk, VTV is slightly more volatile than SCHD, with a Standard Deviation of 13.78. VTV’s Mean Return is 1.05 points higher than that of SCHD, and its R-squared is 92.61 points higher.
The Alpha and Beta of VTV are 1.92 points lower and 0.98 points higher than SCHD’s Alpha and Beta. These metrics suggest that VTV may be a riskier investment than SCHD.
It’s important to note that past performance is not a guarantee of future results. Investors should carefully consider their investment goals and risk tolerance before making any investment decisions.
Expert Recommendations and Ratings
According to broker and registered investment adviser recommendations, both VTV and SCHD are solid investment options for those looking to invest in large value funds.
VTV has received a higher overall rating than SCHD based on factors such as fund performance, expense ratio, and sector exposure.
Analyst Views
Analysts have also weighed in on the VTV vs SCHD debate. While both funds have similar investment strategies, VTV has a higher exposure to the financial services sector, which may make it more appealing to some investors.
VTV has a lower expense ratio than SCHD, which could result in greater returns over time.
However, it’s important to note that past performance does not guarantee future returns. Investors should carefully consider their investment goals and risk tolerance before choosing between these two funds.
Investment Advice and Losses
As with any investment, there is always a risk of loss. It’s important to work with a registered investment adviser and carefully consider your investment goals and risk tolerance before making any investment decisions.
In general, it’s recommended that investors diversify their portfolio across a variety of asset classes and investment strategies to minimize risk. While VTV and SCHD may be good options for large value funds, they should not be the only investments in your portfolio.
While both VTV and SCHD have their pros and cons, it’s important to carefully consider your investment goals and risk tolerance before making any investment decisions.
Working with a registered investment adviser can help you make informed decisions and minimize your risk of investment losses.
To Sum It Up: VTV vs SCHD
After comparing VTV and SCHD, it is clear that both ETFs have their own unique strengths and weaknesses.
VTV has a higher exposure to the financial services sector and a higher standard deviation, which can make it more volatile. However, it has provided lower returns than SCHD over the past ten years.
On the other hand, SCHD has a higher dividend yield and lower expense ratio, which can make it more attractive to income-seeking investors. It also has a more diversified portfolio, with exposure to several different sectors.
The choice between VTV and SCHD will depend on your individual investment goals and risk tolerance. If you are looking for higher returns and are willing to accept more volatility, VTV may be the better choice.
However, if you are looking for a more stable income stream and lower expenses, SCHD may be the way to go.
Regardless of which ETF you choose, it is important to do your own research and consult with a financial advisor before making any investment decisions.
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