The market downturn has led to investors scrambling for safe and secure investment options. Schwab is known for some of the best ETFs in the market and the current dip has made these ETFs cheaper for retail investors. If you are looking to reduce sector-specific and company-specific risks, now is the time to diversify your portfolio with ETFs.
Schwab ETFs have a low expense ratio, have generated steady returns in the past, and own elite stocks. Several Schwab ETFs align with your risk appetite and goals. If you are looking for ETFs that can outperform the stock market, we have the top three to consider. With the S&P 500 and Nasdaq Composite in correction, here are three Schwab ETFs that are a brilliant buy.
Schwab U.S. Large-Cap Growth ETF
The Schwab’s U.S. Large-Cap Growth ETF (SCHG) focuses on the top large-cap stocks. It tracks the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. Its NAV is $23.81 and it is up 6.5% in the past 12 months and about 112% in five years. However, due to the current market sell-off, the ETF is down 14.4% year-to-date. Its holdings include:
- Information Technology: 48.99%
- Consumer Discretionary: 13.76%
- Communication Services: 13.53%
- Health Care: 8.73%
SCHG has a high exposure to the tech industry and holds the Magnificent Seven including Apple, Microsoft, Nvidia, Amazon, Meta, and Google. It also owns stocks like Broadcom and Eli Lilly which have performed exceptionally well in the past.
The fund’s top 10 stocks constitute over 50% of the total assets. SCHG has an expense ratio of 0.04% and $34.7 billion in total assets. Since SCHG is highly exposed to the technology industry, it has managed to generate significant returns over the past years when the sector was thriving. The top tech stocks aren’t cheap, and investing in an ETF that holds the Magnificent Seven will greatly reduce company-specific risks.
Schwab U.S. Dividend Equity ETF
Ideal for passive income seekers, the Schwab U.S. Dividend Equity ETF (NYSE ARCA: SCHD | SCHD Price Prediction) focuses on the top dividend-paying companies. It mirrors the return of the Dow Jones U.S. Dividend 100 index which consists of large-cap, profitable companies that have high dividend yields. The current dividend yield of the ETF is 3.5%. The NAV of SCHD is $25.42, it has remained flat in the past 12 months and is down 6.75% year-to-date. The fund has generated 52% returns in the past five years.
The fund holdings include:
- Financials: 18.73%
- Healthcare: 16.67%
- Consumer staples: 14.37%
- Industrials: 13.28%
The ETF has an expense ratio of 0.06% and the ETF underwent a 3-for-1 split in 2024. SCHD is not heavily focused on the technology industry which ensures steady returns even when the tech sector is down. Its top stocks include Coca-Cola, Verizon Communications, Lockheed Martin Corporation, and ConocoPhillips.
These are dividend-paying companies with stable cash flow and a history of increasing dividends over the years. The best thing about investing in SCHD is the low concentration on the tech sector. It focuses on financials and healthcare which are two indisputable industries. They may see market volatility but both industries play a very important role in the economy and will always bounce back.
Schwab U.S. Large-Cap ETF
The Schwab U.S. Large-Cap ETF (SCHX) is similar to SCHG and invests in large-cap stocks. It tracks the Dow Jones U.S. Large-Cap Total Stock Market Index. SCHX has an NAV of $20.79 and is down 10.19% year-to-date. The fund is up 5% in the past 12 months and 83% in five years. It is trading close to the 52-week low of $19. The fund went for a 3-for-1 stock split in October 2024.
SCHX holds 752 stocks and its holdings include:
- Information Technology: 31.85%
- Financials: 13.83%
- Consumer Discretionary: 11.30%
- Health Care: 10%
Tech makes up a large part of the fund’s assets and the top 10 stocks make up about 33% of the portfolio. The top stocks include the Magnificent Seven including Apple Inc., Amazon Inc., Microsoft Corporation, Nvidia, and Meta Platforms.
While these stocks aren’t enjoying their best days, they were once high-flying stocks that made investors rich. Their long-term performance has helped ETFs like SCHX thrive and deliver double-digit returns. It has an expense ratio of 0.03% and holds $48.1 billion in assets.
Since the fund invests in large-cap stocks, it offers steady returns at low risk. The companies hold a strong market position and have proved their worth time and again, they have the ability to bounce back, no matter how the market moves.
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