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SCHD vs VOO: Which ETF Is Better?

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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 Graphic

SCHD vs VOO

The primary difference between SCHD and VOO is the company that offers the exchange-traded fund (ETF).  VOO is offered by Vanguard while SCHD is offered by Schwab.

Another significant difference is the number of stocks in each, with VOO having 508 different companies in the index compared to 103 with SCHD.

SCHD is offered by Charles Schwab

VOO is offered by Vanguard

VOO has a lower expense ratio of 0.03% compared to 0.06% with SCHD.  SCHD is twice as expensive as VOO.

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)

SCHD

  • 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

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 is beating SCHD by 0.48%.

Here is how their performance compares:

SCHD vs VOO Performance Comparison

Here is another comparison with total returns:

SCHD vs VOO Performance Chart

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 into the tech sector while SCHD leans more into the financials sector.

This may give the appearance that SCHD is more diversified.  However, with only 103 holdings total, SCHD’s top 10 holdings make up 40% of its assets.

Here they are side by side:

SCHD vs VOO Portfolio Comparison

SCHD vs VOO Top Holdings

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 have a big impact on 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 in size 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)

 

VOO Profile

  • 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 $829.0 billion in fund total net assets.

The fund invests in technology, healthcare, financials, industrials, and other industries and has a very low expense ratio.

 

VOO Performance

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:

VOO Performance Chart

Here is VOO and the S&P 500 Index performance chart:

VOO vs S&P500 Performance Graph

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

VOO Top Holdings

Vanguard’s VOO is largely made up of Apple, Microsoft, Alphabet, Amazon, and Tesla but also provides exposure to over 500 other stocks.

 

No Minimum Investment

SCHD and VOO are both 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.

  1. Vanguard to invest in VOO or Charles Schwab for SCHD
  2. M1 Finance to invest in either VOO or SCHD. (Use this link for $50 when you open a new account)

Both of these options are free.  This is important because fees can lower our returns.

I like M1 Finance as the best option because it gives you the flexibility to purchase VOO, SCHD, and thousands of other stocks.

 

SCHD Profile

  • 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 is one of the most popular indexes followed.

SCHD invests in stocks that are included 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.

These U.S. stocks are selected for their strength based on financial ratios in comparison to their counterparts.

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:

  • 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 weight 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%.

 

SCHD Performance

Over the last 10 years, SCHD has performed well with an average of 14.94% per year returns.  This is higher than most averages during the same time frame except growth ETFs.

However, SCHD offers a stronger dividend yield compared to those ETFs.

Here is SCHD’s performance:

SCHD Performance Chart

 SCHD is an incredibly popular ETF with about 174.51B in net assets.

It has performed well over the last 10 years but again there is no guarantee the next 10 years look the same.

 

SCHD Top 10 Holdings

SCHD Top Holdings

SCHD is largely 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.

Some of the higher returns provided by SCHD are offset by its higher expense ratio.

VOO offers stable returns with more diversification and at a lower cost.

SCHD offers higher dividend income with more risk/volatility and at a slightly higher cost.

If having a larger basket of stocks helps you sleep at night, then VOO would be a better option.

If you are seeking 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 it’s so important to purchase and sell your shares commission-free.

Again a great way to do this is with M1 Finance.  You can purchase fractional shares for free and they give you the ability to buy VOO, SCHD, and thousands of other stocks/ETFs.

 

Is SCHD a Good Investment?

SCHD is a good investment to consider 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 be looking for the lowest cost fund that meets their investment needs.

 

Is VOO or SCHD Better for Financial Independence?

Both VOO and SCHD can get you to Financial Independence Retire Early (FIRE).  They both have performed great over the last 10 years and have low expense ratios.

Being part of the FIRE community, we aim for the lowest fees possible and we are big fans of Vanguard.

For those reasons, I prefer VOO over SCHD.

Related Posts:

 

My Winner: VOO

My winner is VOO based on the lower expense ratio and the fact that I love Vanguard.  VOO offers more diversification, 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.

 


Disclaimer
This post may have affiliate links, which means I may receive commissions if you choose to purchase through links I provide (at no extra cost to you). Thank you for supporting the work I put into this site!

This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
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