VOO vs SCHD: Which Is the Better ETF?

This article is a summary of the YouTube video ‘$100K in VOO or SCHD: Which ETF Is Better?’ by Mark Roussin, CPA

Written by: Recapz Bot

Written by: Recapz Bot

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How does it work?
Regular investing is vital; VOO focuses on S&P 500, SCHD on dividends, outperforming past three years, and SCHD has higher dividend income.

Key Insights

  • Building a habit of investing regularly into your investing accounts is important.
  • Diversification and having a strong foundation are crucial in investing.
  • The video compares two popular ETFs: VOO (Vanguard S&P 500 ETF) and SCHD (Schwab US Dividend Equity ETF).
  • VOO has returned 220% over the past decade, while SCHD returned a little over 200%.
  • SCHD outperformed VOO over the past three years.
  • VOO is focused on mirroring the S&P 500 index with a low expense ratio of 0.03%.
  • SCHD tracks the Dow Jones U.S. Dividend 100 Index, focusing on companies that pay consistent dividends.
  • Technology is the leading sector for VOO, while industrials lead the way for SCHD.
  • The top positions in VOO include Apple, Microsoft, Amazon, Nvidia, Google, Tesla, Meta Platforms, Berkshire, and UnitedHealth.
  • The top positions in SCHD include Amgen, Cisco Systems, AbbVie, Home Depot, Broadcom, The Coca-Cola Company, Merck, Chevron, UPS, and PepsiCo.
  • SCHD focuses on dividend-paying stocks, while VOO's dividend fluctuates based on the S&P 500 positions.
  • The dividend yield for SCHD is around 3.6%, while for VOO, it is only 1.6%.
  • Investing $100,000 in VOO over 10 years would result in a market value of nearly $274,000, with an annual dividend income of $4,237.
  • Investing the same amount in SCHD would result in a market value close to VOO's, but with higher dividend income of $9,257.
  • The choice between VOO and SCHD depends on preferences like diversification, dividend income, and total return.

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Transcript

When it comes to investing, it all starts with building a habit of investing regularly into your investing accounts. And then from there, it’s all about being diversified and having a strong foundation. A strong foundation that is diversified gives you something to lean back on when times get tough. A strong foundation that is diversified also allows you to take part in broad market rallies.

And in today’s video, we’re going to take a look at two of the most popular ETFs on the market today. We’re going to look at VOO, which is the Vanguard S&P 500 ETF, and SCHD, which is the Schwab US Dividend Equity ETF. We are going to look in depth at both of these ETFs, compare them to one another, look at top holdings, look at past performances, and look at if you were to invest $100,000 in both VOO and in SCHD, how would things turn out today?

So if you’re excited for today’s video, do me a huge favor and click that like button down below, subscribe to the channel, and let’s get started.

Hey everyone, Mark Rusin here, back for another video. As always, I’m a CPA and not a financial advisor, so please do not take this as financial advice.

And before we begin, let me take a quick moment to thank today’s video sponsor, which is The Motley Fool. The Motley Fool has a ton of great tools and products available for investors of all different levels. And right now, if you go to fool.com forward slash mark, you could sign up to receive their 10 best stocks to buy right now, completely free.

Now back to our video comparing the likes of VOO and SCHD. It sounds like a pretty simple choice, and you probably think that VOO has easily outperformed SCHD over the years. But that’s simply just not the case.

Looking here at this 10-year chart, you can see that VOO has returned 220% over the past decade versus SCHD returning a little over 200%. In fact, over the past three years, even with SCHD underperforming VOO badly in 2023, SCHD is actually outperforming VOO over the past 36 months. Lastly, let’s compare 2023, which I mentioned has been a struggle for SCHD, as the fund is pretty much even on the year. However, VOO is up 15%, so a pretty wide gap here in 2023. But it’s definitely interesting to compare the two.

Those are the past performances for both of these great ETFs. We looked at a 10-year chart, a three-year chart, and a year-to-date chart for 2023. Now let’s take a closer look at the positions and the portfolio of each.

Beginning with VOO. As you know, VOO is the vanguard S&P 500 ETF. It mirrors the S&P 500 index. Given that, the ETF is very passive, and along with that comes a low expense ratio of just 0.03%. Essentially nothing. The ETF has over $325 billion in assets under management, making it the third-largest ETF.

Now let’s quickly look at SCHD, which again is the Schwab U.S. Dividend Equity ETF. SCHD tracks the Dow Jones U.S. Dividend 100 Index, which looks to invest in companies that show their ability to pay consistent dividends. The ETF does not mirror the index completely, as 90% of the net assets mirror that index, but the other 10% gives the fund managers more flexibility. SCHD also is a great low-cost ETF with an expense ratio of only 0.06%, meaning you would pay only $6 for every $10,000 in value that you have within the fund per year. In terms of size, SCHD is much smaller when compared to a giant fund like VOO, as SCHD has assets under management of $50 billion, so a nice-sized fund in itself and the third-largest dividend-focused ETF, trailing the likes of VIG and VYM, which are two other vanguard ETFs. SCHD has been growing rapidly in size and popularity over the past few years and is about to pass VYM as the second-largest dividend-focused ETF.

Now let’s turn our attention to some more important factors that you want to know when investing in an ETF. It’s always important to understand the structure of the ETF and also very important to understand the expense ratio, but what you really want to know when investing is what are the top sectors and what is my exposure in terms of the top positions.

Let’s begin by looking at the sector breakdown, which shows which sectors the portfolio is most exposed to, and we will begin with VOO. Looking here you can see that, to no surprise, technology is the leading sector, with an exposure rate of nearly 30%, followed by healthcare at 13%, financials at 12%, consumer cyclical at 11%, and communications rounding out the top 5, with an exposure rate of nearly 9%.

Now let’s slide that VOO sector breakdown over and put up SCHD’s sector breakdown right next to it so we can easily compare the differences. As you can see, we get a much different picture, as industrials leads the way with 18% exposure for SCHD, that is then followed by healthcare at 16%, financials at 15%, consumer dispensive at 12.6%, and then technology, which was again, the largest sector weighting for VOO, comes in at only 5th largest sector for SCHD with a weighting of 12%. That’s really where it comes down to in the differences here in 2023 in terms of performance. Technology has clearly led the way with communications services in 2023. For the first 6 months, we’re starting to see things broaden out a lot, but technology was a one headed monster here to start the year. As we know, technology is the largest sector, so it should come as no surprise to see Apple and Microsoft holding down the top spots for VOO, accounting for 7.5% and 6.5% respectively. They are then followed by Amazon, Nvidia, Google, Tesla, Meta Platforms, Berkshire, and UnitedHealth rounding out the top 10

This article is a summary of the YouTube video ‘$100K in VOO or SCHD: Which ETF Is Better?’ by Mark Roussin, CPA