We Compare SCHD vs VOO:
We are going to explore the difference between Schwab U.S. Dividend Equity ETF (SCHD) vs Vanguard S&P 500 ETF (VOO)
Choosing between two funds can be difficult, but I will make it easy for you to decide between SCHD and VOO.
SCHD vs VOO
The primary difference between SCHD and VOO is the company that offers the exchange-traded fund (ETF). Vanguard offers VOO, while Schwab offers SCHD.
Another significant difference is the number of stocks in each, with VOO having 508 companies in the index compared to 103 with SCHD.
SCHD is offered by Charles Schwab
Vanguard offers VOO
VOO has a lower expense ratio of 0.03% compared to 0.06% with SCHD. SCHD is twice as expensive as VOO.
- Offered By Vanguard
- Tracks the S&P 500 Index
- Expense Ratio 0.03%
- Holds 508 Stocks
- Broad-Based Stable Passive ETF
- Equivalent Admiral Fund (VFIAX)
- Offered By Charles Schwab
- Tracks Dow Jones U.S Dividend 100 Index
- Expense Ratio 0.06%
- Holds 103 Stocks
- High Yield Dividend ETF
SCHD vs VOO Performance
Schwab's SCHD and VOO have performed almost the same over the last 5 years, with VOO barely beating SCHD by 0.40% annually. Over 10 years, VOO has been beating SCHD by 0.48%.
Here is how their performance compares:
Here is another comparison with total returns:
As you can see, they have performed almost the same over the long term.
SCHD vs VOO Holdings
SCHD is 19% technology, while VOO is 36%. VOO is weighted more toward the tech sector, while SCHD leans more toward the financial sector.
This may give the appearance that SCHD is more diversified. However, with only 103 holdings, SCHD's top 10 comprise 40% of its assets.
Here they are side by side:
The top 10 holdings for SCHD make up 40% of its portfolio, while VOO's top 10 holdings make up 29%.
This means the performance of a few stocks like Coca-Cola, Merck, Amgen, Verizon, and Pfizer will significantly impact the overall performance of SCHD.
VOO and SCHD Differences
VOO vs SCHD differs in that VOO holds five times as many stocks. SCHD holds roughly 103 stocks making it smaller compared to most other ETFs.
By investing in an ETF with more holdings, you are helping diversify your portfolio and minimize risk.
Differences between VOO and SCHD:
- Different Number Of Holdings (508 vs 103)
- Level Of Diversification
- Tracking Index
- Brokerage (VOO is Vanguard, SCHD is Schwab)
- Fund Inception: 2010
- Expense Ratio: 0.03%
- Number Of Stocks: 508
- Top 10 Holdings: 30%
- Dividend Yield: 1.31%
- Equivalent Admiral Fund (VFIAX)
Vanguard S&P 500 ETF (VOO) is a very popular ETF that tracks the S&P 500 index. VOO has over $829 billion in fund total net assets.
The fund invests in technology, healthcare, financials, industrials, and other industries and has a very low expense ratio.
Vanguard's VOO aims to have the same performance returns as the S&P 500 index. VOO and the S&P 500 should always overlap.
Here is VOO's performance:
Here is VOO and the S&P 500 Index performance chart:
VOO (Blue) S&P 500 (Yellow)
As you can see, VOO and the S&P 500 overlap in performance. This should be an expectation in the future.
VOO Top 10 Holdings
Vanguard's VOO comprises Apple, Microsoft, Alphabet, Amazon, and Tesla but also provides exposure to over 500 other stocks.
No Minimum Investment
SCHD and VOO are exchange-traded funds (ETFs), so there is no minimum investment. Investors looking to buy fractional shares can use platforms like M1 Finance.
Normally, fractional shares are not available for ETFs, but with M1 Finance, you can purchase fractional shares with no commission.
Buying fractional shares allows you to maximize your investment. This is great for shares of VOO due to its high prices per share (~$400/share).
There are two easy ways to invest in VOO or SCHD commission-free.
- Vanguard to invest in VOO or Charles Schwab for SCHD
- M1 Finance to invest in either VOO or SCHD. (Get $100 When You Use This Link To Create An Invest Account and Deposit $5,000 Within 30 Days)
Both of these options are free. This is important because fees can lower our returns.
M1 Finance is the best option because it lets you purchase VOO, SCHD, and thousands of other stocks.
I also use Personal Capital to track my investment fees. They have a free Retirement Fee Analyzer that tells you the future impact of fees on your portfolio.
Personal Capital's free tools allow you to easily find which of your investments has high fees so you can switch them to low-cost options. (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)
- Fund Inception: 2011
- Expense Ratio: 0.06%
- Number Of Stocks: 103
- Top 10 Holdings: 40%
- Dividend Yield: 2.90%
The Schwab U.S. Dividend Equity ETF (SCHD) was launched in October 2011 as a fund that seeks to track the total return of the Dow Jones U.S. The Dow Jones is a household name and one of the most popular indexes.
SCHD invests in the Dow Jones index (at least 90% of its net assets go to these stocks). In this way, SCHD measures the performance of high-dividend stocks.
Compared to their counterparts, these U.S. stocks are selected for their strength based on financial ratios.
Companies that qualify to be in the index must have a history of consistent dividend payments for at least 10 successive years.
The criteria for selecting stocks in the index include the following:
- Dividend Yield
- Return On Equity
- Cash Flow To Total Debt
- 5-Year Dividend Growth Rate
The index also uses a modified market capitalization strategy to weigh stocks.
SCHD seeks to track an index that is not only about quality but also the sustainability of dividends.
Lastly, SCHD is a low-cost fund with an expense ratio of 0.06%.
Over the last 10 years, SCHD has performed well, with an average of 14.94% per year returns. This is higher than most averages except growth ETFs during the same time frame.
However, SCHD offers a stronger dividend yield compared to those ETFs.
Here is SCHD's performance:
SCHD is an incredibly popular ETF with about $174 billion in net assets.
It has performed well over the last 10 years, but again there is no guarantee the next 10 years will look the same.
SCHD Top 10 Holdings
SCHD is primarily made up of Coca-Cola, Merck, Amgen, Pfizer, and Cisco.
Which Is Better SCHD or VOO?
SCHD and VOO are different investments. VOO offers more diversification since it holds about 5 times as many stocks.
This diversification hasn't made a difference in terms of its performance. However, you can expect less volatility in general with higher diversified funds.
Its higher expense ratio offsets some of the higher returns provided by SCHD.
VOO offers stable returns with more diversification and at a lower cost.
SCHD offers higher dividend income with more risk/volatility and a slightly higher cost.
If having a larger basket of stocks helps you sleep at night, VOO would be a better option.
If you seek the highest possible returns and can handle the increased volatility, then SCHD might be a better option.
Charles Schwab has a fund similar to VOO called Schwab S&P 500 Index Fund (SWPPX). SWPPX has a lower expense ratio and the same holdings profile as VOO.
Lastly, it's important to consider costs and fees because they can cost you in the long run. That's why purchasing and selling your shares commission-free is essential.
Again a great way to do this is with M1 Finance. (Get $100 When You Use This Link To Create An Invest Account and Deposit $5,000 Within 30 Days)
You can purchase fractional shares for free, allowing you to buy VOO, SCHD, and thousands of other stocks/ETFs.
Is SCHD a Good Investment?
SCHD is a good investment for higher dividend yields at a low cost. SCHD can be a good investment for those that need a bit more dividend income.
A good investment aims to replicate the target index returns at the lowest cost possible. This is something SCHD does well.
Every investor should seek the lowest-cost fund that meets their investment needs.
Is VOO or SCHD Better for Financial Independence?
VOO and SCHD can get you to Financial Independence Retire Early (FIRE). They have performed well over the last 10 years and have low expense ratios.
Being part of the FIRE community, we aim for the lowest fees possible and are big fans of Vanguard.
Calculate Your FI Number With My Free FIRE Calculator
For those reasons, I prefer VOO over SCHD.
My Winner: VOO
My winner is VOO based on the lower expense ratio and the fact that I love Vanguard. VOO offers more diversification and lower fees and is a Vanguard fund.
Lower fees are a guaranteed way to keep more money in your portfolio!
I would also suggest considering other funds that give you even more diversification, like VTSAX.