VB vs SCHA: A Comparison

When it comes to investing in exchange-traded funds (ETFs), you have plenty of options to choose from.

Two popular ETFs are the Vanguard Small-Cap ETF (VB) and the Schwab U.S. Small-Cap ETF (SCHA). While both funds invest in small-cap stocks, they have their differences.

In this article, we’ll compare VB vs SCHA to help you decide which one is right for your investment portfolio.

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VB and SCHA are both designed to track the performance of small-cap stocks, but they have different approaches. VB tracks the performance of the CRSP US Small Cap Index, while SCHA tracks the performance of the Dow Jones U.S. Small-Cap Total Stock Market Index. As a result, there are some differences in the companies that each fund holds. For example, VB has a higher weighting in financials and healthcare, while SCHA has a higher weighting in industrials and consumer discretionary.

It’s important to understand the financial metrics of each fund before investing. VB has a lower expense ratio of 0.05% compared to SCHA’s 0.04%. However, VB has a higher minimum investment requirement of $3,000, while SCHA has no minimum investment requirement. Additionally, VB has a higher 5-year average return of 19.06% compared to SCHA’s 18.45%. But past performance is not a guarantee of future results, so it’s important to consider other factors as well.

Key Takeaways VB vs SCHA

  • VB and SCHA are both small-cap ETFs, but they track different indexes and have different holdings.
  • VB has a lower expense ratio but a higher minimum investment requirement compared to SCHA.
  • When choosing between VB vs SCHA, it’s important to consider your investment goals and risk tolerance.

Overview of VB vs SCHA

When it comes to investing in small-cap stocks, Vanguard’s VB and Charles Schwab’s SCHA are two popular exchange-traded funds (ETFs) that investors can choose from. Both funds offer exposure to the small-cap segment of the U.S. equity market, but there are some differences that set them apart.

Fund Issuers: Vanguard and Charles Schwab

One of the primary differences between VB and SCHA is the issuer. VB is managed by Vanguard, one of the world’s largest investment companies with a reputation for low-cost index funds. On the other hand, SCHA is managed by Charles Schwab, a financial services company that offers a wide range of investment products and services.

Purpose and Investment Strategy

VB and SCHA have similar investment objectives: to track the performance of the CRSP US Small Cap Index, which is a benchmark that measures the performance of small-cap U.S. stocks. However, there are some differences in their investment strategies that may appeal to different types of investors.

VB invests in a broad range of small-cap stocks, with a focus on companies that are expected to grow faster than their peers. It also employs a full-replication strategy, which means it holds all the stocks in the index in proportion to their market capitalization.

SCHA, on the other hand, takes a more targeted approach, investing in a subset of small-cap stocks that are expected to outperform the broader small-cap market. It also uses a sampling strategy, which means it holds a smaller number of stocks that are representative of the index.

In terms of fees, both funds have low expense ratios, with SCHA being slightly cheaper at 0.04% compared to VB’s 0.05%. However, VB has a higher dividend yield than SCHA, which may be attractive to income-seeking investors.

In summary, both VB and SCHA offer exposure to the small-cap segment of the U.S. equity market, but they differ in their investment strategies and fund issuers. Choosing between the two will depend on your investment objectives and preferences.

Financial Metrics Comparison

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Expense Ratio Analysis

When it comes to expense ratios, Vanguard Small-Cap ETF (VB) has a lower expense ratio of 0.05% compared to Schwab U.S. Small-Cap ETF (SCHA) at 0.04% (source). This means that for every $10,000 invested, you would pay $5 annually in fees for VB and $4 for SCHA. While the difference may seem small, it can add up over time, especially for long-term investors.

Performance Over Time

Over the past 1 year, VB has outperformed SCHA with a return of 34.45% compared to SCHA’s 33.41% (source). However, SCHA has had higher returns over the past 3 years, 5 years, and 10 years with annualized returns of 23.81%, 17.73%, and 14.60%, respectively, compared to VB’s 22.68%, 16.85%, and 13.77% (source).

Dividend Yields and Payouts

Both VB and SCHA offer dividend yields, with VB having a slightly higher yield of 0.92% compared to SCHA’s 0.87% (source). Additionally, VB has a higher dividend payout of $1.76 per share compared to SCHA’s $0.54 per share (source).

Overall, when comparing VB and SCHA, it is important to consider factors such as expense ratios, performance over time, and dividend yields and payouts. While VB may have a lower expense ratio and higher returns over the past year, SCHA has had higher returns over the past 3 years, 5 years, and 10 years. Additionally, VB has a slightly higher dividend yield and significantly higher dividend payout compared to SCHA.

Portfolio Composition and Risk

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Holdings and Diversification

When comparing VB and SCHA, it is important to consider their portfolio composition and diversification. VB is an ETF that tracks the performance of the CRSP US Small Cap Index, which includes small-cap stocks of U.S. companies. On the other hand, SCHA tracks the performance of the Dow Jones U.S. Small-Cap Total Stock Market Index, which includes small-cap stocks of U.S. companies.

VB has a total of 1,462 holdings, which provides a good level of diversification. The top 10 holdings of VB make up 3.7% of the portfolio, with the largest holding being The Ultimate Software Group, Inc. at 0.45%. SCHA has a total of 2,003 holdings, which provides a higher level of diversification compared to VB. The top 10 holdings of SCHA make up 3.2% of the portfolio, with the largest holding being The Ultimate Software Group, Inc. at 0.4%.

Risk Assessment Metrics

When comparing the risk of VB and SCHA, it is important to consider various risk assessment metrics such as volatility, Sharpe ratio, and maximum drawdown. The volatility of VB and SCHA over the past three years is 13.6% and 14.2%, respectively. This indicates that VB has a lower level of volatility compared to SCHA.

The Sharpe ratio is a measure of risk-adjusted performance, which takes into account the return of the investment and the level of risk taken to achieve that return. VB has a Sharpe ratio of 0.81, while SCHA has a Sharpe ratio of 0.76. This indicates that VB has a higher level of risk-adjusted performance compared to SCHA.

The maximum drawdown is a measure of the largest loss experienced by an investment from its peak value to its lowest value. VB has a maximum drawdown of 33.6%, while SCHA has a maximum drawdown of 34.6%. This indicates that VB has a lower level of risk compared to SCHA.

Finally, it is important to consider the correlation between VB and SCHA. The correlation between the two ETFs is high, with a value of 0.98. This indicates that the two ETFs are highly correlated and may provide similar returns in certain market conditions.

Overall, when considering the portfolio composition and risk of VB and SCHA, it is important to consider the level of diversification, volatility, Sharpe ratio, maximum drawdown, and correlation between the two ETFs.

Investment Considerations

When deciding between VB and SCHA, there are several investment considerations to keep in mind. Below, we will discuss two important factors to consider: Investor Profile Suitability and Market Conditions and Timing.

Investor Profile Suitability

Before investing in either VB or SCHA, it’s important to consider your investor profile suitability. VB is a small-cap ETF that invests in companies with a market capitalization of $300 million to $2 billion. SCHA, on the other hand, invests in companies with a market capitalization of $200 million to $5 billion. If you’re a conservative investor, VB may be a better choice for you as it invests in larger small-cap companies. However, if you’re a more aggressive investor looking for higher returns, SCHA may be a better choice as it invests in smaller small-cap companies.

Another factor to consider is your investment time horizon. If you’re a long-term investor looking for portfolio growth, both VB and SCHA may be suitable options for you. However, if you’re a short-term investor looking to make a quick profit, small-cap ETFs may not be the best choice for you.

Market Conditions and Timing

Market conditions and timing can also play a role in deciding between VB and SCHA. Small-cap stocks tend to outperform during periods of economic growth and underperform during periods of economic contraction. Therefore, if you believe that the economy is going to continue to grow, investing in a small-cap ETF like VB or SCHA may be a good choice for you.

It’s also important to consider the current market conditions before investing in either VB or SCHA. If the market is overvalued, it may be a good idea to wait for a correction before investing. Conversely, if the market is undervalued, it may be a good time to buy.

In conclusion, when deciding between VB and SCHA, it’s important to consider your investor profile suitability and the current market conditions and timing. As always, it’s recommended that you speak with a financial advisor or broker before making any investment decisions.

Legal and Regulatory Information

When considering investing in any ETF, it is important to review the legal and regulatory information provided by the issuer. Both VB and SCHA are ETFs managed by reputable firms, Vanguard and Charles Schwab, respectively. As with any investment, there are risks involved, and it is important to understand the potential legal and regulatory implications.

Both Vanguard and Charles Schwab are registered investment advisers with the Securities and Exchange Commission (SEC). As such, they are subject to SEC regulations and must adhere to strict guidelines regarding disclosure and transparency. It is important to review the prospectus and other legal documents provided by the issuer to fully understand the terms and conditions of the investment.

In the event of any damages or losses resulting from the investment, it is important to understand the legal recourse available. Both VB and SCHA are subject to the same legal and regulatory framework, which includes limitations on damages and lost profits. It is important to review the legal and regulatory information provided by the issuer to fully understand the potential risks and limitations.

It is also important to note that both VB and SCHA are subject to the same indirect and consequential damages limitations. This means that in the event of any losses resulting from the investment, the issuer is not liable for any indirect or consequential damages.

In summary, both VB and SCHA are managed by reputable firms and are subject to the same legal and regulatory framework. It is important to review the legal and regulatory information provided by the issuer to fully understand the potential risks and limitations. As with any investment, it is important to carefully consider the potential risks and rewards before making a decision.

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