VO vs. SCHD: What’s The Difference?

The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the Schwab U.S. Dividend Equity ETF (SCHD) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and SCHD is a Schwab ETFs Large Value fund. So, what’s the difference between VO and SCHD? And which fund is better?

The expense ratio of VO is 0.02 percentage points lower than SCHD’s (0.04% vs. 0.06%). VO also has a higher exposure to the technology sector and a higher standard deviation. Overall, VO has provided lower returns than SCHD over the past ten years.

In this article, we’ll compare VO vs. SCHD. We’ll look at fund composition and portfolio growth, as well as at their risk metrics and annual returns. Moreover, I’ll also discuss VO’s and SCHD’s performance, industry exposure, and holdings and examine how these affect their overall returns.

Summary

VO SCHD
Name Vanguard Mid-Cap Index Fund ETF Shares Schwab U.S. Dividend Equity ETF
Category Mid-Cap Blend Large Value
Issuer Vanguard Schwab ETFs
AUM 154.08B 26B
Avg. Return 14.34% 14.80%
Div. Yield 1.23% 2.89%
Expense Ratio 0.04% 0.06%

The Vanguard Mid-Cap Index Fund ETF Shares (VO) is a Mid-Cap Blend fund that is issued by Vanguard. It currently has 154.08B total assets under management and has yielded an average annual return of 14.34% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.04%.

The Schwab U.S. Dividend Equity ETF (SCHD) is a Large Value fund that is issued by Schwab ETFs. It currently has 26B total assets under management and has yielded an average annual return of 14.80% over the past 10 years. The fund has a dividend yield of 2.89% with an expense ratio of 0.06%.

VO’s dividend yield is 1.66% lower than that of SCHD (1.23% vs. 2.89%). Also, VO yielded on average 0.47% less per year over the past decade (14.34% vs. 14.80%). The expense ratio of VO is 0.02 percentage points lower than SCHD’s (0.04% vs. 0.06%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

VO vs. SCHD - Industry Exposure

VO SCHD
Technology 22.01% 16.26%
Industrials 11.92% 18.05%
Energy 3.82% 1.87%
Communication Services 5.61% 4.96%
Utilities 5.12% 0.0%
Healthcare 13.03% 12.64%
Consumer Defensive 3.25% 14.04%
Real Estate 8.67% 0.0%
Financial Services 11.08% 21.69%
Consumer Cyclical 12.12% 8.36%
Basic Materials 3.36% 2.13%

The Vanguard Mid-Cap Index Fund ETF Shares (VO) has the most exposure to the Technology sector at 22.01%. This is followed by Healthcare and Consumer Cyclical at 13.03% and 12.12% respectively. Basic Materials (3.36%), Energy (3.82%), and Utilities (5.12%) only make up 12.30% of the fund’s total assets.

VO’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Financial Services, Industrials, and Consumer Cyclical stocks at 5.61%, 8.67%, 11.08%, 11.92%, and 12.12%.

The Schwab U.S. Dividend Equity ETF (SCHD) has the most exposure to the Financial Services sector at 21.69%. This is followed by Industrials and Technology at 18.05% and 16.26% respectively. Utilities (0.0%), Energy (1.87%), and Basic Materials (2.13%) only make up 4.00% of the fund’s total assets.

SCHD’s mid-section with moderate exposure is comprised of Communication Services, Consumer Cyclical, Healthcare, Consumer Defensive, and Technology stocks at 4.96%, 8.36%, 12.64%, 14.04%, and 16.26%.

VO is 5.75% more exposed to the Technology sector than SCHD (22.01% vs 16.26%). VO’s exposure to Healthcare and Consumer Cyclical stocks is 0.39% higher and 3.76% higher respectively (13.03% vs. 12.64% and 12.12% vs. 8.36%). In total, Basic Materials, Energy, and Utilities also make up 8.30% more of the fund’s holdings compared to SCHD (12.30% vs. 4.00%).

Holdings

VO - Holdings

VO Holdings Weight
IDEXX Laboratories Inc 0.78%
DocuSign Inc 0.75%
Marvell Technology Inc 0.68%
IQVIA Holdings Inc 0.68%
Chipotle Mexican Grill Inc 0.63%
Veeva Systems Inc Class A 0.62%
Digital Realty Trust Inc 0.62%
Centene Corp 0.62%
Aptiv PLC 0.62%
Carrier Global Corp Ordinary Shares 0.61%

VO’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Marvell Technology Inc, IQVIA Holdings Inc, and Chipotle Mexican Grill Inc at 0.78%, 0.75%, 0.68%, 0.68%, and 0.63%.

Veeva Systems Inc Class A (0.62%), Digital Realty Trust Inc (0.62%), and Centene Corp (0.62%) have a slightly smaller but still significant weight. Aptiv PLC and Carrier Global Corp Ordinary Shares are also represented in the VO’s holdings at 0.62% and 0.61%.

SCHD - Holdings

SCHD Holdings Weight
Merck & Co Inc 4.24%
The Home Depot Inc 4.19%
Texas Instruments Inc 4.16%
Broadcom Inc 4.15%
Amgen Inc 4.11%
PepsiCo Inc 4.09%
BlackRock Inc 4.05%
Pfizer Inc 3.97%
Verizon Communications Inc 3.96%
Cisco Systems Inc 3.96%

SCHD’s Top Holdings are Merck & Co Inc, The Home Depot Inc, Texas Instruments Inc, Broadcom Inc, and Amgen Inc at 4.24%, 4.19%, 4.16%, 4.15%, and 4.11%.

PepsiCo Inc (4.09%), BlackRock Inc (4.05%), and Pfizer Inc (3.97%) have a slightly smaller but still significant weight. Verizon Communications Inc and Cisco Systems Inc are also represented in the SCHD’s holdings at 3.96% and 3.96%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

VO SCHD
Mean Return 1.14 0
R-squared 92.22 0
Std. Deviation 15.65 0
Alpha -2.71 0
Beta 1.11 0
Sharpe Ratio 0.83 0
Treynor Ratio 11.32 0

The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a R-squared of 92.22 with a Alpha of -2.71 and a Beta of 1.11. Its Treynor Ratio is 11.32 while VO’s Sharpe Ratio is 0.83. Furthermore, the fund has a Standard Deviation of 15.65 and a Mean Return of 1.14.

The Schwab U.S. Dividend Equity ETF (SCHD) has a Alpha of 0 with a Mean Return of 0 and a Treynor Ratio of 0. Its Beta is 0 while SCHD’s Sharpe Ratio is 0. Furthermore, the fund has a Standard Deviation of 0 and a R-squared of 0.

VO’s Mean Return is 1.14 points higher than that of SCHD and its R-squared is 92.22 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than SCHD. The Alpha and Beta of VO are 2.71 points lower and 1.11 points higher than SCHD’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Gemini - the simplest and cheapest broker I've found! Click here to read more (link to Gemini).

Performance

Annual Returns

VO vs. SCHD - Annual Returns

Year VO SCHD
2020 18.22% 15.11%
2019 31.04% 27.28%
2018 -9.21% -5.46%
2017 19.25% 20.88%
2016 11.23% 16.25%
2015 -1.34% -0.21%
2014 13.76% 11.66%
2013 35.15% 32.9%
2012 15.98% 11.4%
2011 -1.96% 0.0%
2010 25.57% 0.0%

VO had its best year in 2013 with an annual return of 35.15%. VO’s worst year over the past decade yielded -9.21% and occurred in 2018. In most years the Vanguard Mid-Cap Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2020 where annual returns amounted to 13.76%, 15.98%, and 18.22% respectively.

The year 2013 was the strongest year for SCHD, returning 32.9% on an annual basis. The poorest year for SCHD in the last ten years was 2018, with a yield of -5.46%. Most years the Schwab U.S. Dividend Equity ETF has given investors modest returns, such as in 2012, 2014, and 2020, when gains were 11.4%, 11.66%, and 15.11% respectively.

Portfolio Growth

VO vs. SCHD - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VO $10,000 $28,298 14.34%
SCHD $10,000 $28,823 14.80%

A $10,000 investment in VO would have resulted in a final balance of $28,298. This is a profit of $18,298 over 8 years and amounts to a compound annual growth rate (CAGR) of 14.34%.

With a $10,000 investment in SCHD, the end total would have been $28,823. This equates to a $18,823 profit over 8 years and a compound annual growth rate (CAGR) of 14.80%.

VO’s CAGR is 0.47 percentage points lower than that of SCHD and as a result, would have yielded $525 less on a $10,000 investment. Thus, VO performed worse than SCHD by 0.47% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply