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SCHD vs VTI: Which Is The Best ETF?

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We Compare SCHD vs VTI:

We are going to explore the difference between Schwab U.S. Dividend Equity ETF (SCHD) vs Vanguard Total Stock Market ETF (VTI)

Choosing between two funds can be difficult, but I will make it easy for you to decide between SCHD vs VTI.

SCHD vs VTI Graphic

 

SCHD vs VTI

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

Another significant difference is the number of stocks in each, with VTI having 3535 different companies in the index compared to 103 with SCHD.

SCHD is offered by Charles Schwab

VTI is offered by Vanguard

VTI also has a lower expense ratio of 0.03% compared to 0.06% with SCHD.  That makes SCHD twice as expensive as VTI.

SCHD

  • Fund Inception: 2011
  • Offered By Charles Schwab
  • Tracks Dow Jones U.S Dividend 100 Index
  • Expense Ratio 0.06%
  • Number Of Stocks: 103
  • High Yield Dividend ETF

VTI

  • Fund Inception: 2000
  • Tracks the CRSP US Total Market Index
  • Expense Ratio: 0.03%
  • Vanguard ETF
  • Number Of Stocks: 3535
  • Admiral Shares (VTSAX)

 

SCHD vs VTI Performance

SCHD and VTI have performed almost the same over the last 10 years with VTI barely beating SCHD by 0.05% annually.

Here is how their performance compares:

SCHD vs VTI Performance Comparison

Here is another comparison of short term performance:

SCHD vs VTI Performance Chart

As you can see, they have performed almost the same over the long term and SCHD has outperformed over the short term.

 

SCHD vs VTI Holdings

There is a significant difference in the number of holdings for SCHD and VTI.  SCHD includes 103 stocks in the ETF while VTI holds 3535 stocks.

VTI holds 34 times more companies compared to SCHD.

These funds also differ in their sector diversification.  SCHD is 19% technology while VTI is 29%.  VTI 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 are SCHD and VTI holdings side-by-side:

SCHD vs VTI Holdings

The top 10 holdings for SCHD make up 40% of its portfolio while VTI’s top 10 holdings make up 24%.

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.

 

SCHD vs VTI Overlap

There is an overlap between SCHD and VTI that includes 98 stocks.  Almost all of the holdings in SCHD are included in VTI.  However, only 2.7% of VTI’s holdings are included in SCHD.

Here is SCHD and VTI holdings overlap:

SCHD vs VTI Overlap

This means VTI includes all the holdings in SCHD and includes many more holdings.

This gives VTI more diversification compared to SCHD.

 

VTI and SCHD Differences

VTI vs SCHD differs in that VTI holds 34 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 VTI and SCHD:

  • Different Number Of Holdings (~3535 vs ~103)
  • Level Of Diversification
  • Tracking Index
  • Brokerage (VTI is Vanguard, SCHD is Schwab)

 

SCHD Description

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.  This means that the fund tracks the performance of the Dow Jones U.S. Dividend 100 Index to replicate its total returns.

The SCHD exchange-traded fund is passively managed and designed to give investors broad exposure to the Large Cap Value segment of the US equity market.

It has amassed assets over $29.73 billion which makes it one of the largest ETFs attempting to match the Large Cap Value portion of the US equity market.

Large-cap companies are more stable than mid and small-cap companies.  This means less risk for investors.

It can also be a more reliable source of cash flow as these companies usually have a market capitalization of $10 billion and above.

 

SCHD Performance

SCHD closely monitors and seeks to replicate the performance of its underlying index which is the Dow Jones U.S. Dividend 100 Index.  The Dow Jones U.S. Dividend 100 Index is one of the top funds in the United States.

The Index measures the performance of high dividend-yielding stocks issued by U.S. companies.

These are stocks that have over the years shown consistency in paying dividends which is their primary advantage over other companies.

SCHD Performance Chart

As you can see, SCHD has performed well since its inception in 2011.

The ETF has a beta of 0.96 and a standard deviation of 22.79% for the trailing three-year period.  This makes SCHD a medium-risk choice in its class.

The fund has roughly 103 holdings.

For investors looking for a fund to give them exposure to the Large Cap Value segment of the market, Schwab U.S. Dividend Equity ETF may be a good option based on selected key benefits.

These include expense ratio, expected asset class return, and momentum.

 

SCHD Costs

One of the many key factors to consider in choosing an ETF especially for a long-term investment strategy is cost.  To analyze the cost of an ETF, you should look at the expense ratio.

Cheaper funds tend to yield higher profits since they spend less on management.

SCHD is one of the cheapest exchange trade funds with an expense ratio of 0.06%.

In other words, for a $10,000 investment, the ETF charges you $6 for annual operating expenses.

 

SCHD Holdings

The top 10 holdings for SCHD make up 40% of its total assets.

SCHD Top Holdings

Schwab’s SCHD is largely made up of Amgen, Coca-Cola, Merck, and Verizon and provides exposure to over 100 stocks.

With only 103 holdings in the portfolio, SCHD is not very diversified compared to other Schwab ETFs like Schwab Total Stock Market Index Fund (SWTSX).

 

VTI Description

  • Fund Inception: 2000
  • Tracks the CRSP US Total Market Index
  • Expense Ratio: 0.03%
  • Vanguard ETF
  • No Minimum Investment
  • Number Of Stocks: 3535
  • Admiral Shares (VTSAX)

Vanguard Total Stock Market ETF (VTI) represents close to 100% of the U.S. equity market that is publicly traded.  It also tracks the CRSP U.S. Total Market Index.

Vanguard’s VTI has an expense ratio of 0.03%.

This notably implies that the fund has limited exposure to several international stocks.

However, this does not in any way affect the companies represented in the fund.  These stocks have a significant international presence.

 

VTI Performance

Vanguard Total Stock Market ETF (VTI) is popular for so many reasons of which consistent returns are a major part.

VTI Performance Chart

Its risk level is similar to that of the S&P 500.

VTI vs S&P 500 Performance Chart

 

VTI Holdings

Vanguard’s VTI is largely made up of Apple, Microsoft, Google, Amazon, and Tesla but also provides exposure to over 3500 stocks.

Here are the top 10 holdings for VTI:

VTI Top Holdings

Major sectors in the index include:

  • Technology
  • Healthcare
  • Consumer Services
  • Financials
  • Industrials

The top 10 holdings make up 25% of its total net assets.

 

No Minimum Investment

SCHD and VTI 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 VTI due to its high prices per share (~$225/share).

There are two easy ways to invest in VTI or SCHD commission-free.

  1. Vanguard to invest in VTI or Charles Schwab for SCHD
  2. M1 Finance to invest in either VTI 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 VTI, SCHD, and thousands of other stocks.

 

Which Is Better SCHD or VTI?

SCHD and VTI are different investments.  VTI offers more diversification since it holds about 34 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 slightly higher expense ratio.

VTI 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 VTI 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.

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 VTI, SCHD, and thousands of other stocks/ETFs.

 

Is VTI or SCHD Better for Financial Independence?

Both VTI and SCHD have performed well enough to 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 VTI over SCHD.

Related Posts:

 

My Winner: VTI

My winner is VTI based on the lower expense ratio and the fact that I love Vanguard.

Vanguard’s VTI offers:

  • Diversification
  • Lower Fees
  • Vanguard Fund

Lower fees are a guaranteed way to keep more money in your portfolio!

I would also suggest considering VTI’s Admiral fund 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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