As an investor, I am always on the lookout for the best investment options available. Two popular exchange-traded funds (ETFs) that have caught my attention are the SPDR S&P 500 ETF Trust (SPY) and the Schwab U.S. Dividend Equity ETF (SCHD). Both of these ETFs are among the Top 100 ETFs and are known for their high performance and reliability.
SCHD vs SPY: SPY is a large blend fund managed by State Street Global Advisors that tracks the performance of the S&P 500 index. On the other hand, SCHD is a large value fund managed by Charles Schwab that tracks the performance of the Dow Jones U.S. Dividend 100 Index. While both funds have similar objectives, they differ in their investment strategies, holdings, and fees.
So, which fund is better? In this article, I will compare and analyze the differences between SPY and SCHD to help you make an informed decision about which ETF is right for your investment portfolio.
Whether you are a seasoned investor or just starting out, understanding the pros and cons of each fund can help you make the best investment decisions for your financial goals.
Table of Contents
What is SCHD?
When it comes to investing in exchange-traded funds (ETFs), it’s important to understand what you’re investing in. In this section, I’ll provide an overview of the Schwab US Dividend Equity ETF (SCHD).
SCHD is a passively managed fund by Charles Schwab that aims to track the performance of the Dow Jones U.S. Dividend 100 Index.
This index includes 100 high-quality U.S. stocks that have a strong track record of paying dividends. By investing in SCHD, investors can gain exposure to a diversified portfolio of companies that have a history of paying and increasing their dividends.
One of the advantages of investing in SCHD is its low expense ratio. At 0.06%, SCHD’s expense ratio is lower than SPDR S&P 500 ETF’s (SPY) 0.09% expense ratio. This means that investors can keep more of their returns and potentially earn higher returns over the long term.
SCHD was launched on October 19, 2011, and has since gained a reputation as a reliable and consistent performer.
It’s important to note that SCHD is a passive ETF, meaning that it’s not actively managed but aims to replicate the performance of the underlying index as closely as possible.
What is SPY?
When it comes to investing in the stock market, one of the most popular options for investors is the SPDR S&P 500 ETF (SPY).
This exchange-traded fund was launched on January 21, 1993, and is designed to track the performance of the S&P 500 Index, which is widely regarded as one of the best measures of the overall performance of the U.S. stock market.
As a passive ETF, SPY aims to replicate the performance of the underlying index as closely as possible. This means that the fund is not actively managed, but instead, it invests in the same stocks that make up the S&P 500 Index in the same proportions.
By doing so, SPY provides investors with a simple and low-cost way to gain exposure to the U.S. stock market.
One of the key advantages of investing in SPY is its low expense ratio. As of the time of writing, the fund has an expense ratio of 0.09%, which is relatively low compared to other ETFs and mutual funds. This means that investors can keep more of their returns and benefit from the power of compounding over time.
SCHD vs SPY: Key Differences
Key Differences Table
| ETF | Launch Date | Expense Ratio | Index Tracked | Dividend Yield |
|---|---|---|---|---|
| SCHD | Oct 19, 2011 | 0.06% | Dow Jones U.S. Dividend 100 Index | 3.61% |
| SPY | Jan 21, 1993 | 0.09% | S&P 500 Index | 1.32% |
When comparing SCHD and SPY, there are a few key differences to consider. Both ETFs are passively managed and designed to track the performance of their respective indices. However, there are some notable differences in their launch dates, expense ratios, index tracked, dividend yields, and more.
SCHD, managed by Charles Schwab, tracks the Dow Jones U.S. Dividend 100 Index, which is comprised of 100 high dividend yielding U.S. stocks. It was launched on Oct 19, 2011, and has an expense ratio of 0.06%.
On the other hand, SPY, managed by State Street, tracks the S&P 500 Index, which is comprised of 500 large-cap U.S. stocks. It was launched on Jan 21, 1993, and has an expense ratio of 0.09%.
Performance Comparison: SCHD vs SPY
| ETF | Launch Date | Underlying Index | Average Annual Return | Expense Ratio |
|---|---|---|---|---|
| Schwab US Dividend Equity ETF (SCHD) | October 2011 | Dow Jones U.S. Dividend 100 Index | 12.19% | 0.06% |
| SPDR S&P 500 ETF (SPY) | January 1993 | S&P 500 Index | 10.94% | 0.09% |
When considering investments in ETFs, performance is a key factor to consider. In this section, I will compare the performance of Schwab US Dividend Equity ETF (SCHD) and SPDR S&P 500 ETF (SPY).
Both SCHD and SPY are passively managed ETFs, which means that they aim to replicate the performance of their respective underlying indexes as closely as possible.
SCHD tracks the Dow Jones U.S. Dividend 100 Index, while SPY tracks the S&P 500 Index. SCHD was launched in October 2011, while SPY has been around since January 1993.
Despite being around for a shorter time, SCHD has been able to provide a solid performance to its investors.
According to ETF.com, SCHD has had an average annual return of 12.19% since its inception, while SPY has had an average annual return of 10.94%.
One of the key reasons for SCHD’s strong performance is its focus on high-quality dividend-paying companies. The companies in its portfolio are selected based on their ability to pay and grow dividends over time.
This focus has helped SCHD to provide a steady stream of income to its investors while also participating in the growth of the stock market.
On the other hand, SPY provides exposure to the broader stock market through its tracking of the S&P 500 Index.
While it has a longer track record, its performance is subject to the ups and downs of the market. As a result, it may be more volatile than SCHD. In terms of expenses, SCHD has a lower expense ratio of 0.06% compared to SPY’s 0.09%.
This means that investors in SCHD will pay less in fees over time, which can have a significant impact on their overall returns.
SCHD vs. SPY – Volatility Comparison
When it comes to volatility, SCHD is generally considered to be less volatile than SPY. This is because SCHD tracks dividend-paying stocks, which tend to be more stable than non-dividend-paying stocks.
On the other hand, SPY tracks a broader range of stocks, including both dividend-paying and non-dividend-paying stocks, which can result in higher volatility.
SCHD vs. SPY – Dividend Comparison
One of the key differences between SCHD and SPY is their dividend yields. SCHD has a higher dividend yield than SPY, with a current yield of 3.61% compared to SPY’s 1.32%.
This is because SCHD tracks high dividend-yielding stocks, while SPY tracks a broader range of stocks with varying dividend yields.
Expense Ratio Comparison: SPY vs SCHD
When it comes to comparing SCHD and SPY, one of the key factors to consider is their expense ratio. SCHD has a lower expense ratio of 0.06%, while SPY has an expense ratio of 0.09%. This means that SCHD is slightly cheaper to own than SPY.
For investors who are looking for a low-cost way to invest in the stock market, SCHD may be a better option. The lower expense ratio means that investors can keep more of their returns and potentially earn higher returns over the long term. It’s worth noting that expense ratios can have a significant impact on investment returns over time.
Even a small difference in expense ratios can add up to a significant amount of money over the long term. Therefore, it’s important to consider expense ratios when comparing different investment options.
Which One is Right for You?
When it comes to choosing between SCHD and SPY, the decision ultimately depends on your investment goals and risk tolerance. Here are a few key factors to consider:
Volatility Comparison
If you’re looking for a less volatile option, SCHD may be the better choice. As a fund that focuses on dividend-paying stocks, it tends to be less sensitive to market fluctuations compared to SPY, which tracks the broader S&P 500 index.
Dividend Comparison
If you’re looking for income-generating investments, SCHD may be more appealing. With a dividend yield of 3.61%, it offers a higher yield compared to SPY’s 1.28%. Additionally, SCHD has a track record of consistently increasing its dividend payouts over time.
Performance Comparison
When it comes to overall performance, SPY has historically outperformed SCHD due to its exposure to a broader range of stocks.
However, past performance is not a guarantee of future results, and it’s important to consider your investment goals and time horizon before making a decision.
The decision between SCHD and SPY depends on your individual investment goals and risk tolerance. It may be helpful to consult with a financial advisor to determine which option is best suited for your portfolio.
FAQs SCHD vs SPY
Is SCHD better than SPY?
When it comes to choosing between SCHD and SPY, there is no clear winner. Both ETFs have their own unique characteristics and can be suitable for different investors. u003cbru003eu003cbru003eWhile SCHD focuses on dividend-paying companies, SPY tracks the performance of the Su0026amp;P 500 index.
Is SCHD A Good Fund?
SCHD is a good fund for investors seeking exposure to dividend-paying companies. It has a low expense ratio of 0.06%, which makes it a cost-effective option for long-term investors. u003cbru003eu003cbru003eAdditionally, SCHD has a solid track record of providing steady returns over the years.
Is SCHD A Good Long Term ETF?
SCHD can be a good long-term ETF for investors seeking exposure to dividend-paying companies. It has a history of providing steady returns and has a low expense ratio, which can help maximize returns over the long run.
Is SCHD A Safe Long Term Investment?
SCHD can be considered a safe long-term investment for investors looking for exposure to dividend-paying companies. However, like any investment, there are risks involved, and investors should always do their due diligence before investing.
What Is The Downside Of SPY ETF?
One of the downsides of the SPY ETF is that it has a higher expense ratio compared to SCHD. Additionally, since it tracks the Su0026amp;P 500 index, it is heavily weighted towards large-cap companies, which can make it less diversified compared to other ETFs.
Is SPY The Best Long Term Investment?
SPY can be a good long-term investment for investors seeking exposure to the Su0026amp;P 500 index. However, there is no one-size-fits-all answer when it comes to investing, and investors should always consider their own investment goals and risk tolerance before making any investment decisions.
