If you’re considering investing in the stock market, two popular exchange-traded funds (ETFs) that may pique your interest are iShares Core S&P 500 ETF (IVV) and Schwab US Dividend Equity ETF (SCHD). IVV vs SCHD:
However, there are some key differences between the two that you should be aware of before making a decision. IVV is a large blend fund that tracks the S&P 500 index, which includes 500 large-cap U.S. stocks.
This ETF is designed to provide investors with exposure to the broader U.S. stock market and has a low expense ratio of 0.03%. On the other hand, SCHD is a large value fund that tracks the Dow Jones U.S. Dividend 100 Index, which includes 100 high dividend yielding U.S. stocks. This ETF is designed to provide investors with exposure to high dividend yielding U.S. stocks and has a slightly higher expense ratio of 0.06%.
Overview
When it comes to investing in the stock market, exchange-traded funds (ETFs) have become an increasingly popular option. Two of the most popular ETFs are the iShares Core S&P 500 ETF (IVV) and the Schwab U.S. Dividend Equity ETF (SCHD).
In this section, we’ll take a look at the similarities and differences between these two funds.
What’s The Difference?
While both IVV and SCHD are ETFs, they have some key differences. IVV is an index fund that tracks the performance of the S&P 500, which is made up of 500 of the largest publicly traded companies in the US.
SCHD, on the other hand, is a fund that invests in US equities that pay high dividends. It tracks the Dow Jones U.S. Dividend 100 Index, which includes 100 US companies that have a track record of consistently paying dividends.
IVV vs SCHD – Fund Composition
IVV holds a wide variety of large-cap US stocks, with its top holdings including companies like Apple, Microsoft, and Amazon. SCHD, on the other hand, focuses on companies that pay high dividends, with its top holdings including companies like Procter & Gamble, Coca-Cola, and PepsiCo.
Credit Quality
Both IVV and SCHD have investment-grade credit quality, with IVV having a slightly higher credit quality than SCHD.
Regional Allocation
IVV has a heavy allocation towards the US, with almost all of its holdings being US-based companies. SCHD also has a heavy allocation towards the US, but it does hold some international stocks as well.
Maturity
IVV has a low maturity, as it holds primarily large-cap stocks. SCHD has a slightly higher maturity, as it invests in companies that pay high dividends, which tend to be more established companies.
Both IVV and SCHD are great options for investors looking to invest in the stock market. IVV is a great choice for those looking for exposure to the S&P 500, while SCHD is a good option for those looking for high dividend yields. It’s important to consider your investment goals and risk tolerance when choosing between these two funds.
Analysis
When comparing IVV and SCHD, it’s important to consider their volatility and drawdown. Here’s what you need to know:
Volatility
IVV and SCHD have similar levels of volatility. IVV has a standard deviation of 0.17% while SCHD has a standard deviation of 0.16%. This means that both ETFs are relatively stable and don’t experience large price swings.
Drawdown
When it comes to drawdown, IVV and SCHD have different levels of risk. IVV has a maximum drawdown of -19.87%, while SCHD has a maximum drawdown of -11.87%. This means that IVV is riskier than SCHD in terms of potential losses.
Correlation
IVV and SCHD are highly correlated, with a correlation coefficient of 0.94. This means that they tend to move in the same direction, making them good options for diversification.
Algorithmic Trading Strategy
Both IVV and SCHD can be used in an algorithmic trading strategy. However, it’s important to consider the leverage used in the strategy. IVV has a leverage ratio of 1:1, while SCHD has a leverage ratio of 1:2. This means that SCHD is more leveraged and therefore riskier than IVV.
Risk
When it comes to overall risk, SCHD is a safer option than IVV. SCHD has a lower maximum drawdown and is less leveraged than IVV. However, IVV is still a relatively stable ETF with a low standard deviation.
In conclusion, when comparing IVV and SCHD, it’s important to consider their volatility, drawdown, correlation, and use in algorithmic trading strategies. While both ETFs are relatively stable, SCHD is a safer option due to its lower maximum drawdown and lower leverage.
Performance
When comparing IVV and SCHD, one of the most important factors to consider is performance. Let’s take a closer look at how these two ETFs have performed over the years.
Annual Returns
Both IVV and SCHD have provided investors with strong returns over the past decade. According to PortfoliosLab, the average annual return for IVV over the past 10 years has been 15.53%, while SCHD has returned an average of 14.80%. It’s worth noting that past performance is not a guarantee of future results.
Looking at the annual returns for each ETF, we can see that both IVV and SCHD have had some strong years. For example, in 2019, IVV returned 31.47%, while SCHD returned 20.57%. However, there have also been years where returns were more modest. In 2020, IVV returned 18.40%, while SCHD returned 2.80%.
Portfolio Growth
When it comes to portfolio growth, it’s important to consider not just the returns of the ETF itself, but also how those returns translate to the growth of your investment portfolio. One way to do this is by looking at the assets under management (AUM) for each ETF.
IVV has an AUM of $308.298B, while SCHD has an AUM of $26B. This suggests that IVV is a more popular choice among investors, which could have implications for liquidity and cash flow.
Another factor to consider when looking at portfolio growth is the underlying index for each ETF. IVV tracks the S&P 500, which is a widely recognized benchmark for the US stock market. Meanwhile, SCHD tracks the Dow Jones U.S. Dividend 100 Index, which focuses on high dividend yielding US stocks.
Bottom line: IVV vs SCHD
When it comes to choosing between IVV and SCHD, there are a few key differences to consider. Here are some important factors to keep in mind:
Expense Ratio
IVV has a lower expense ratio than SCHD, which means you’ll pay less in fees over time. However, SCHD’s expense ratio is still relatively low, so this may not be a major factor for everyone.
Sector Exposure
IVV has a higher exposure to the technology sector than SCHD, which may be a plus if you’re looking for more tech-heavy investments. However, if you prefer a more diversified portfolio, SCHD may be a better choice.
Returns
Over the past ten years, SCHD has provided higher returns than IVV. However, it’s important to keep in mind that past performance is not necessarily indicative of future results.
Dividend Yield
SCHD has a higher dividend yield than IVV, which may be attractive to income-seeking investors. However, it’s important to keep in mind that higher yields can also come with higher risk.
Ultimately, the choice between IVV and SCHD will depend on your individual investment goals and risk tolerance. Consider consulting with a financial advisor to determine which ETF is right for you.
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FAQs
Here are some frequently asked questions about IVV and SCHD:
What Is IVV?
IVV is an exchange-traded fund (ETF) that tracks the S&P 500 index. It is managed by BlackRock, Inc., one of the largest investment management companies in the world.
This ETF has a low expense ratio of 0.03%, making it a cost-effective way to invest in the S&P 500.
What Is SCHD?
SCHD is an ETF that focuses on high-quality U.S. dividend-paying stocks. It is managed by Charles Schwab Investment Management, a subsidiary of Schwab. This ETF has an expense ratio of 0.06%, which is higher than IVV’s expense ratio, but still relatively low compared to other ETFs.
Which One Is Better For Diversification?
Both IVV and SCHD can provide diversification benefits to your portfolio. IVV tracks the S&P 500, which is a broad-based index of 500 large-cap U.S. stocks, while SCHD focuses on high-quality dividend-paying stocks.
If you are looking for exposure to the top U.S. companies, IVV may be a better choice. If you are looking for income from dividend-paying stocks, SCHD may be a better fit.
Which One Has A Higher Exposure To Technology?
IVV has a higher exposure to the technology sector than SCHD. This is because many of the top companies in the S&P 500 are technology companies, such as Apple, Microsoft, and Alphabet.
If you believe that the technology sector will continue to perform well in the future, IVV may be a better choice.
Which One Has A Higher Dividend Yield?
SCHD has a higher dividend yield than IVV. This is because SCHD focuses on dividend-paying stocks, while IVV tracks the S&P 500, which includes both dividend-paying and non-dividend-paying stocks.
If you are looking for income from your investments, SCHD may be a better choice.
Which One Is Better For Expense Ratio?
IVV has a lower expense ratio than SCHD. If you are looking for a low-cost way to invest in the S&P 500, IVV may be a better choice.
However, keep in mind that SCHD’s expense ratio is still relatively low compared to other ETFs.
Which One Is Better For #SPYmin?
Both IVV and SCHD can be used for #SPYmin, which is a trading strategy that involves buying and selling ETFs based on the movements of the S&P 500 index.
However, keep in mind that #SPYmin is a high-risk trading strategy that may not be suitable for all investors.
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