VBR vs SCHA: Choosing the Right Strategy

If you’re looking to invest in small-cap stocks, you may have come across the Vanguard Small-Cap ETF (VBR) and the Schwab U.S. Small-Cap ETF (SCHA).

VBR vs SCHA: Both of these funds are designed to track the performance of the small-cap sector of the U.S. stock market, but they have some key differences that investors should be aware of.

In this article, we’ll take a closer look at VBR vs SCHA to help you decide which one is right for you.

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Understanding VBR and SCHA VBR and SCHA are both exchange-traded funds, or ETFs, that are designed to track the performance of small-cap stocks in the U.S. stock market. VBR tracks the CRSP US Small Cap Index, while SCHA tracks the Dow Jones U.S. Small-Cap Total Stock Market Index. While both indexes are designed to track small-cap stocks, they have different methodologies for selecting and weighting the stocks in the index.

Performance Metrics When it comes to performance, VBR and SCHA have had similar returns over the past few years. However, there are some key differences in their performance metrics that investors should be aware of. For example, VBR has a slightly higher expense ratio than SCHA, which can eat into your returns over time. On the other hand, VBR has a higher dividend yield than SCHA, which can be attractive to income-seeking investors.

Key Takeaways VBR vs SCHA

  • VBR and SCHA are both ETFs that track the performance of small-cap stocks in the U.S. stock market.
  • While both funds have had similar returns, there are some key differences in their performance metrics and fundamental comparisons that investors should be aware of.
  • When choosing between VBR and SCHA, investors should consider their investment goals, risk tolerance, and other factors before making a decision.

Understanding VBR vs SCHA

Fund Overview

VBR and SCHA are two exchange-traded funds (ETFs) that are designed to track the performance of small-cap value stocks in the US market. Both funds are managed by reputable investment firms, with VBR being managed by Vanguard and SCHA being managed by Schwab.

Vanguard Small-Cap Value ETF (VBR) provides exposure to small-cap value stocks in the US market by tracking the CRSP US Small Cap Value Index. The fund has been in existence since 2004 and has an expense ratio of 0.07%. As of December 2023, the fund has assets under management of $28.8 billion.

Schwab U.S. Small-Cap ETF (SCHA) tracks the Dow Jones U.S. Small-Cap Total Stock Market Index and provides exposure to small-cap stocks in the US market. The fund has been in existence since 2009 and has an expense ratio of 0.04%. As of December 2023, the fund has assets under management of $23.2 billion.

Index Tracking

VBR tracks the CRSP US Small Cap Value Index, which is a benchmark index that measures the performance of small-cap value stocks in the US market. The index is designed to track the performance of companies with smaller market capitalization and lower price-to-book ratios.

SCHA tracks the Dow Jones U.S. Small-Cap Total Stock Market Index, which measures the performance of small-cap stocks in the US market. The index is designed to track the performance of companies with smaller market capitalization.

Investment Strategy VBR vs SCHA

Both VBR and SCHA invest in small-cap value stocks but have different investment strategies. VBR focuses on value stocks, which are stocks that are undervalued by the market. SCHA, on the other hand, invests in a mix of value and growth stocks.

VBR’s investment strategy is to provide exposure to small-cap value stocks that have strong fundamentals and are trading at a discount to their intrinsic value. The fund aims to provide long-term capital appreciation by investing in a diversified portfolio of small-cap value stocks.

SCHA’s investment strategy is to provide exposure to small-cap stocks that have strong fundamentals and are trading at a reasonable price. The fund aims to provide long-term capital appreciation by investing in a diversified portfolio of small-cap stocks.

Both funds have shown consistent portfolio growth over the years, with VBR having a 10-year return of 8.54% and SCHA having a 10-year return of 9.05%.

Overall, both VBR and SCHA are good options for investors looking to invest in small-cap value stocks in the US market. However, it is important to consider factors such as expense ratio, investment strategy, and holdings before making an investment decision.

Performance Metrics

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Historical Returns

When it comes to historical returns, both VBR and SCHA have performed well. According to ETF Database, over the past 10 years, VBR has provided a total return of 168.76%, while SCHA has provided a total return of 162.98%. This indicates that both funds have performed well for investors, with VBR slightly outperforming SCHA.

Risk Analysis

In terms of risk analysis, both VBR and SCHA have similar risk metrics. According to Money Main St, VBR has a standard deviation of 19.98%, while SCHA has a standard deviation of 20.12%. This indicates that both funds have similar levels of volatility. Additionally, both funds have a beta of around 1, indicating that they are closely correlated with the overall market.

Dividend Profiles

When it comes to dividend yield, VBR and SCHA have different profiles. According to ETF.com, VBR has a dividend yield of 1.55%, while SCHA has a dividend yield of 1.31%. This indicates that VBR may be a better choice for investors looking for income. However, it’s worth noting that both funds have provided similar levels of income in the past.

Overall, both VBR and SCHA have performed well historically and have similar risk metrics. However, VBR may be a better choice for investors looking for income due to its higher dividend yield.

Fundamental Comparisons

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Expense Ratios

When comparing VBR and SCHA, one of the first things you should consider is the expense ratio. VBR has an expense ratio of 0.07%, which is slightly higher than SCHA’s expense ratio of 0.04%. This means that you will pay $7 and $4 respectively for every $10,000 invested in the ETFs. While the difference may seem minimal, it can add up over time, especially if you are investing a large sum of money.

Asset Management

Another important factor to consider is the asset management of the ETFs. VBR is managed by Vanguard, which is one of the largest asset management companies in the world. On the other hand, SCHA is managed by Charles Schwab, which is also a well-respected asset management company. Both companies have a long history of managing ETFs and other investment vehicles, so you can be confident in their ability to manage your money.

Holdings and Sector Exposure

When it comes to holdings and sector exposure, VBR and SCHA have some differences. VBR has 1,367 holdings, while SCHA has 1,752 holdings. This means that SCHA has a more diversified portfolio than VBR. Additionally, VBR has a higher exposure to the industrials sector, while SCHA has a higher exposure to financial services and consumer cyclical sectors.

In terms of industry exposure, VBR has a higher exposure to the industrials sector, which makes up 21.1% of the portfolio. On the other hand, SCHA has a higher exposure to financial services and consumer cyclical sectors, which make up 24.4% and 22.7% of the portfolio respectively.

Overall, when comparing VBR and SCHA, it is important to consider the expense ratio, asset management, holdings, and sector exposure. While both ETFs have their pros and cons, you should choose the one that aligns with your investment goals and risk tolerance.

Investor Considerations

When considering whether to invest in VBR or SCHA, there are a few factors to keep in mind. Below are some key considerations that can help you make an informed decision.

Investment Goals and Horizons

Your investment goals and time horizon are important factors to consider when deciding between VBR and SCHA. VBR invests in small-cap value stocks, which tend to have higher volatility but also potentially higher returns. SCHA, on the other hand, invests in small-cap stocks across the market, which may provide more diversification but with potentially lower returns.

If you have a longer investment horizon and are willing to take on more risk, VBR may be a better fit for you. However, if you have a shorter investment horizon or are more risk-averse, SCHA may be a better option.

Liquidity and Trade Volume

Another important consideration is liquidity and trade volume. VBR has a higher average daily trading volume than SCHA, which means it may be easier to buy and sell shares of VBR compared to SCHA. This can be especially important for investors who want to trade frequently or who need to quickly enter or exit a position.

However, it’s worth noting that both VBR and SCHA are relatively liquid ETFs, meaning that they can be easily bought and sold on major exchanges. Additionally, both ETFs have low expense ratios, which can help keep costs low for investors.

In summary, when deciding between VBR and SCHA, it’s important to consider your investment goals and time horizon, as well as liquidity and trade volume. By taking these factors into account, you can make an informed decision about which ETF is the best fit for your portfolio.

Top Holdings and Company Analysis

Leading Securities

When comparing VBR and SCHA, it’s important to consider their top holdings and how they contribute to the overall performance of each fund. VBR’s top holding is Builders FirstSource Inc, a company that provides building materials and services to contractors and homebuilders. On the other hand, SCHA’s top holding is Lattice Semiconductor Corp, a technology company that designs and manufactures high-performance programmable logic devices.

While both companies have had strong performance in recent years, it’s worth noting that Builders FirstSource Inc has provided slightly higher returns than Lattice Semiconductor Corp over the past ten years. However, it’s important to remember that past performance does not guarantee future results.

Industry Diversification

VBR and SCHA also differ in terms of their industry diversification. VBR is heavily invested in the services sector, which makes up over 20% of its portfolio. Other significant sectors include technology, real estate, and energy. In contrast, SCHA has a more balanced diversification across sectors, with no single sector representing more than 16% of its portfolio. Its top sectors include consumer defensive, communication services, and basic materials.

It’s important to consider the potential risks and rewards of investing in each sector when deciding between VBR and SCHA. For example, the services sector may be more volatile than other sectors due to its sensitivity to economic cycles. However, it may also offer higher potential returns during periods of economic growth.

Overall, when comparing VBR and SCHA, it’s important to consider their top holdings and industry diversification. While VBR’s top holding has provided slightly higher returns over the past ten years, SCHA has a more balanced diversification across sectors. Ultimately, the decision between these two funds will depend on your individual investment goals and risk tolerance.

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