SCHX vs SCHB: A Comprehensive Comparison

If you’re looking to invest in a diversified portfolio of US stocks, you may have come across two popular ETFs: SCHX vs SCHB.

Both of these ETFs are offered by Charles Schwab, a well-known investment firm.

While they may seem similar at first glance, there are some key differences between the two that could impact your investment strategy and returns.

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SCHX tracks the Dow Jones US Large-Cap Total Stock Market Index, which includes the top 750 US stocks by market capitalization. In contrast, SCHB tracks the Dow Jones US Broad Market Index, which includes over 2,500 US stocks. This means that SCHB offers broader exposure to the US stock market, while SCHX is more focused on large-cap stocks. Depending on your investment goals and risk tolerance, one of these ETFs may be a better fit for your portfolio.

Key Takeaways SCHX vs SCHB

  • SCHX and SCHB are both popular ETFs offered by Charles Schwab that track different US stock market indexes.
  • SCHX focuses on large-cap stocks, while SCHB offers broader exposure to the US stock market.
  • Depending on your investment goals and risk tolerance, one of these ETFs may be a better fit for your portfolio.

Comparison of SCHX vs SCHB

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Overview of SCHX

SCHX is a U.S. large-cap ETF that tracks the Dow Jones U.S. Large-Cap Total Stock Market Index. It has an expense ratio of 0.03%. The ETF holds 760 companies in the index. Its biggest holding is Apple Inc. SCHX has provided 0.22% higher returns than SCHB over the past ten years [1].

Overview of SCHB

SCHB is a U.S. broad market ETF that tracks the Dow Jones U.S. Broad Stock Market Index. It has an expense ratio of 0.03%. The ETF holds 2,551 companies in the index. Its biggest holding is also Apple Inc. SCHB’s dividend yield for the trailing twelve months is around 1.45%, which matches SCHX’s 1.44% yield [2].

When comparing SCHX vs SCHB, one significant difference is the number of stocks in each ETF. SCHB has more than three times the number of companies in the index compared to SCHX. SCHB tracks a broader market index than SCHX, which tracks only large-cap companies. SCHB’s broader exposure may appeal to investors looking for more diversification. On the other hand, SCHX’s focus on large-cap companies may be more attractive to investors looking for exposure to established, stable companies.

Another difference between the two ETFs is their performance over the past ten years. As mentioned earlier, SCHX has provided 0.22% higher returns than SCHB over this period. However, past performance is not a guarantee of future results, and investors should consider their investment goals and risk tolerance before making any investment decisions.

In summary, when choosing between SCHX and SCHB, investors should consider the number of companies in each ETF, their investment goals, and their risk tolerance. Both ETFs have low expense ratios and similar dividend yields, making them attractive options for investors looking for exposure to the U.S. stock market.

Investment Strategy and Management Style

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SCHX Investment Approach

The Schwab U.S. Large-Cap ETF (SCHX) is a passive (index-based) ETF that tracks the Dow Jones U.S. Large-Cap Total Stock Market Index. The fund follows a full replication technique, which means it holds all of the securities in the index in proportion to their weightings. This ensures that the fund’s performance closely matches that of the index it tracks. The fund’s management style is focused on providing investors with broad exposure to U.S. large-cap stocks.

SCHB Investment Approach

The Schwab U.S. Broad Market ETF (SCHB) is also a passive (index-based) ETF that tracks the Dow Jones U.S. Broad Stock Market Index. The fund follows a representative sampling technique, which means it holds a subset of the securities in the index that represent the overall market. This approach is designed to reduce transaction costs and tracking errors while still providing investors with broad exposure to the U.S. stock market. The fund’s management style is focused on providing investors with exposure to a diversified portfolio of U.S. stocks.

Both SCHX and SCHB have low expense ratios of 0.03%, making them cost-effective investment options. Additionally, both funds offer investors exposure to U.S. equities, but they differ in their investment approach and management style.

When choosing between SCHX and SCHB, it’s important to consider your investment goals and risk tolerance. If you’re looking for exposure to U.S. large-cap stocks, SCHX may be a better option as it follows a full replication technique and tracks the Dow Jones U.S. Large-Cap Total Stock Market Index. On the other hand, if you’re looking for exposure to a diversified portfolio of U.S. stocks, SCHB may be a better option as it follows a representative sampling technique and tracks the Dow Jones U.S. Broad Stock Market Index. Ultimately, the choice between SCHX and SCHB depends on your investment objectives and preferences.

Performance and Returns

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When it comes to investing in ETFs, performance and returns are two of the most important factors that an investor should consider. In this section, we will compare the performance and returns of SCHX and SCHB.

Historical Performance Comparison

Over the past 10 years, both SCHX and SCHB have delivered pretty close results. According to PortfoliosLab, SCHB has had an annualized return of 11.18%, while SCHX has not been far ahead at 11.67%. However, in the year-to-date period, SCHX has achieved a 20.94% return, which is significantly higher than SCHB’s 19.76% return.

Looking at the short-term performance, SCHX has outperformed SCHB in the last 1-year and 3-year periods, with returns of 32.30% and 20.85%, respectively. On the other hand, SCHB has outperformed SCHX in the last 5-year and 10-year periods, with returns of 87.51% and 150.17%, respectively.

Dividend Yield and Payouts

Another important factor to consider when comparing ETFs is the dividend yield and payouts. According to Wealth of Geeks, both SCHX and SCHB have a similar dividend yield of around 1.4%. However, SCHB has a higher dividend payout ratio of 48.9%, compared to SCHX’s 40.7%.

It is important to note that past performance is not a guarantee of future results, and investors should always do their due diligence before making any investment decisions.

Cost Analysis

Expense Ratio Comparison

When comparing SCHX vs SCHB, expense ratio is one of the most important factors to consider. The expense ratio is the fee that the fund charges for managing your investment. Both SCHX and SCHB have the same expense ratio of 0.03% (etf.com). This means that for every $10,000 invested, you will pay $3 per year in management fees. It is worth noting that this is significantly lower than the industry average expense ratio of 0.44% (etf.com).

Cost Efficiency

SCHB and SCHX are both low-cost ETFs. Low-cost ETFs are a popular choice among investors because they allow for cost-efficient investing. This is because low-cost ETFs have lower expense ratios, which means lower management fees. Lower management fees can lead to higher returns over the long term.

When it comes to cost efficiency, SCHB has an advantage over SCHX. SCHB is a broad market ETF that tracks the entire US stock market. This means that it provides exposure to more stocks than SCHX, which is a large-cap ETF that tracks only the largest US companies. As a result, SCHB is more diversified and has a lower risk profile than SCHX. Additionally, SCHB has a lower turnover rate than SCHX, which means that it incurs lower transaction costs (wealthofgeeks.com).

Overall, when it comes to cost analysis, both SCHX and SCHB are low-cost ETFs with the same expense ratio of 0.03%. However, SCHB has an advantage over SCHX when it comes to cost efficiency due to its broader exposure to the US stock market and lower turnover rate.

Risk and Volatility

Risk Assessment

When it comes to investing, understanding the risks associated with a particular security is crucial. Both SCHX and SCHB are exchange-traded funds (ETFs) that track the performance of the U.S. equity market. However, there are some differences in the way they are constructed that can affect their risk profile.

One way to assess risk is by looking at the Sharpe ratio, which measures the excess return of an investment relative to its volatility. According to PortfoliosLab, SCHX has a slightly higher Sharpe ratio than SCHB, indicating that it may offer better risk-adjusted returns.

Another important metric to consider is beta, which measures the sensitivity of a security’s returns to changes in the market. SCHX has a beta of 1.05, while SCHB has a beta of 1.00, indicating that SCHX may be slightly more volatile than SCHB.

Volatility Metrics

Volatility is another important factor to consider when assessing the risk of an investment. One way to measure volatility is by looking at the standard deviation of returns over a certain period. According to Wealth of Geeks, SCHX has a higher standard deviation than SCHB, which means that it has been more volatile historically.

Another important metric to consider is maximum drawdown, which measures the largest loss an investment has experienced over a certain period. According to Money Main St, SCHX has a higher maximum drawdown than SCHB, which means that it has experienced larger losses in the past.

It’s worth noting that past performance does not guarantee future results, and that investing always involves some degree of risk. When deciding between SCHX and SCHB, it’s important to consider your own risk tolerance and investment goals.

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