When it comes to investing, it can be challenging to decide which exchange-traded fund (ETF) to choose.
Two popular ETFs that investors often compare are the iShares Core S&P Total U.S. Stock Market ETF (ITOT) and the Schwab U.S. Dividend Equity ETF (SCHD).
Both ETFs have similar objectives, but they differ in their investment strategies, performance, and portfolio composition.
ITOT and SCHD are both investment options that provide exposure to the U.S. stock market. ITOT aims to track the performance of the S&P Total Market Index, which includes over 3,500 stocks across various sectors and market capitalizations.
SCHD, on the other hand, focuses on high-quality U.S. companies that have a consistent history of paying dividends. It tracks the performance of the Dow Jones U.S. Dividend 100 Index, which includes 100 U.S. stocks with the highest dividend yields and consistent dividend payments.
When deciding between ITOT and SCHD, it’s essential to consider their performance, portfolio composition, trading and liquidity, and risk factors.
In the following sections, we’ll provide an overview of each ETF and compare their performance, portfolio composition, trading and liquidity, and risk factors. By the end of this article, you’ll have a better understanding of which ETF might be the right fit for your investment goals and risk tolerance.
Key Takeaways ITOT vs SCHD
- ITOT and SCHD are two popular ETFs that provide exposure to the U.S. stock market.
- ITOT tracks the S&P Total Market Index, while SCHD focuses on high-quality U.S. companies with a consistent history of paying dividends.
- When selecting between ITOT and SCHD, it’s essential to consider their performance, portfolio composition, trading and liquidity, and risk factors.
Overview of ITOT vs SCHD
When it comes to investing in the US stock market, two popular exchange-traded funds (ETFs) are iShares Core S&P Total U.S. Stock Market ETF (ITOT) and Schwab U.S. Broad Market ETF (SCHD). Both ETFs aim to provide investors with broad exposure to the US stock market, but they differ in their investment focus, fund structure, and expense ratio.
Investment Focus
ITOT seeks to track the performance of the S&P Total Market Index, which includes large-, mid-, small-, and micro-cap stocks. This index represents approximately 99.5% of the total US equity market. On the other hand, SCHD focuses on high-quality dividend-paying stocks from the US broad market. It tracks the Dow Jones U.S. Dividend 100 Index, which includes 100 stocks that have a consistent track record of paying dividends.
Fund Structure
ITOT and SCHD have different fund structures. ITOT is a passively managed ETF that seeks to replicate the performance of the S&P Total Market Index. It holds all the stocks in the index in proportion to their market capitalization. SCHD, on the other hand, is also a passively managed ETF, but it uses a proprietary screening process to select stocks. The screening process focuses on companies with a history of stable or increasing dividends.
Expense Ratio
Expense ratio is an important factor to consider when investing in ETFs. It represents the annual fee that the fund charges to cover its operating expenses. ITOT has a lower expense ratio of 0.03%, which makes it a more cost-effective option for investors. SCHD, on the other hand, has a slightly higher expense ratio of 0.06%.
In summary, ITOT and SCHD are both popular ETFs that provide investors with broad exposure to the US stock market. ITOT tracks the S&P Total Market Index and has a lower expense ratio, while SCHD focuses on high-quality dividend-paying stocks and has a slightly higher expense ratio. When choosing between these two ETFs, it is important to consider your investment goals and risk tolerance.
Performance Comparison ITOT vs SCHD
When comparing ITOT and SCHD, one of the first things to consider is their historical returns. According to etf.com, ITOT has provided slightly higher returns than SCHD over the past ten years. However, it is important to note that past performance is not always indicative of future results.
Historical Returns
ITOT tracks the S&P Total Market Index, which includes over 3,500 stocks. SCHD, on the other hand, tracks the Dow Jones U.S. Dividend 100 Index, which includes 100 high dividend-yielding U.S. stocks. Both funds have a long-term investment horizon and are designed to provide investors with broad exposure to the U.S. equity market.
Over the past five years, ITOT has provided an annualized return of 18.14%, while SCHD has provided an annualized return of 17.59%. Over the past ten years, ITOT has provided an annualized return of 15.62%, while SCHD has provided an annualized return of 15.47%. While the difference in returns is small, it is worth noting that ITOT has outperformed SCHD in both timeframes.
Dividend Yield
Another important factor to consider when comparing ITOT and SCHD is their dividend yield. According to mrmarvinallen.com, SCHD has a higher dividend yield than ITOT. SCHD’s current dividend yield is 2.89%, while ITOT’s current dividend yield is 1.33%.
It is important to note, however, that dividend yield should not be the only factor considered when choosing between these two funds. While SCHD has a higher dividend yield, it may not necessarily provide higher total returns than ITOT.
In summary, when comparing ITOT and SCHD, it is important to consider both their historical returns and dividend yield. While ITOT has provided slightly higher returns than SCHD over the past ten years, SCHD has a higher dividend yield than ITOT. Ultimately, the choice between these two funds will depend on your individual investment goals and risk tolerance.
Portfolio Composition
When comparing ITOT and SCHD, it is important to consider their portfolio composition. This section will cover the sector allocation and top holdings for both funds.
Sector Allocation
ITOT and SCHD have slightly different sector allocations. ITOT has a higher allocation to technology and healthcare sectors, while SCHD has a higher allocation to consumer staples and industrials.
Here is a breakdown of the sector allocation for each fund:
| Sector | ITOT | SCHD |
|---|---|---|
| Information Technology | 24.6% | 14.1% |
| Healthcare | 14.1% | 9.0% |
| Financials | 13.9% | 10.7% |
| Consumer Discretionary | 12.6% | 7.5% |
| Communication Services | 9.4% | 6.3% |
| Industrials | 8.8% | 12.5% |
| Consumer Staples | 7.5% | 13.3% |
| Utilities | 3.1% | 3.5% |
| Real Estate | 2.3% | 6.3% |
| Energy | 2.1% | 7.0% |
| Materials | 1.6% | 2.8% |
Top Holdings
ITOT and SCHD have different top holdings. Apple Inc is the largest holding for ITOT, while Broadcom Inc is the largest holding for SCHD.
Here are the top 5 holdings for each fund:
ITOT
- Apple Inc
- Microsoft Corp
- Amazon.com Inc
- Facebook Inc
- Alphabet Inc Class A
SCHD
- Broadcom Inc
- PepsiCo Inc
- Procter & Gamble Co
- Coca-Cola Co
- Verizon Communications Inc
It is worth noting that ITOT and SCHD have different approaches to selecting their holdings. ITOT seeks to track the performance of the S&P Total Market Index, which includes all common equities listed on the NYSE, Nasdaq, and other exchanges. SCHD, on the other hand, focuses on high-quality companies with a track record of paying dividends.
Overall, when considering the portfolio composition of ITOT and SCHD, it is important to weigh the differences in sector allocation and top holdings against your investment goals and risk tolerance.
Trading and Liquidity
When it comes to trading and liquidity, both ITOT and SCHD are highly accessible and widely traded ETFs. Here are some key points to consider:
Average Daily Volume
ITOT has a higher average daily volume than SCHD, which means it is more actively traded. As of December 9, 2023, ITOT has an average daily volume of 3,327,035 shares, while SCHD has an average daily volume of 1,042,559 shares. This higher trading volume means that ITOT may be more liquid than SCHD, which can be an advantage for investors who need to buy or sell shares quickly.
Market Accessibility
Both ITOT and SCHD are widely accessible on major brokerage platforms, so investors can easily buy and sell shares through their preferred broker. However, it’s worth noting that some brokers may offer better trading conditions for one ETF over the other, so it’s important to compare fees and other trading conditions before making a decision.
In summary, both ITOT and SCHD are highly accessible and widely traded ETFs, with ITOT having a higher average daily volume and potentially greater liquidity. However, market accessibility may vary depending on your preferred broker, so it’s important to compare trading conditions before making a decision.
Risk and Considerations
When investing in ETFs, it is important to consider the potential risks involved. Here are some key factors to keep in mind when comparing ITOT and SCHD.
Market Volatility
One important consideration is market volatility. As an investor, you should be prepared for the possibility of significant fluctuations in the value of your investment. Both ITOT and SCHD are subject to market volatility, which means that their performance may be affected by factors such as economic conditions, geopolitical events, and investor sentiment.
Investment Time Horizon
Another important factor to consider when comparing ITOT and SCHD is your investment time horizon. If you are investing for the long term, you may be more willing to tolerate short-term market fluctuations in exchange for the potential for higher returns over time. On the other hand, if you have a shorter time horizon, you may be more concerned about the potential for short-term losses.
When considering your investment time horizon, it is also important to keep in mind that past performance is not necessarily indicative of future results. While ITOT and SCHD have both performed well in the past, there is no guarantee that they will continue to do so in the future.
Overall, it is important to remember that investing always carries some level of risk, and there is always the possibility that you may lose value on your investment. However, by carefully considering your investment goals and risk tolerance, you can make informed decisions about which ETFs may be right for you.
