As far as the top exchange traded fund (ETF) providers are concerned, Schwab has to be among the top picks for most long-term investors. This company has one of the longest track records in this space, and puts forward some of the most comprehensive and well-diversified portfolios of stocks out there to investors, all while charging some of the lowest fees for doing so.
For long-term passive investors considering ETFs for their compounding upside over time (and ultra low fee structure), that’s a great thing.
That said, there are thousands of Schwab ETF options for investors to choose from. With that in mind, identifying even a list of a dozen or two such ETFs to consider investing in can be difficult.
I’ve dove into dozens of ETFs from Schwab and other companies, and the following three ideas are atop my list right now.
Let’s dive in!
Schwab U.S. Dividend Equity ETF (SCHD)
I’ve long touted the Schwab U.S. Dividend Equity ETF (SCHD) as my top ETF idea within the Schwab universe, for good reason. This is my top holding for exposure to dividend stocks, an area of the market I’ve begun to build more exposure to of late.
Now, I started building this position a few years ago, when interest rates were on the rise. Thus, my overall return picture for this holding isn’t fantastic.
However, for investors who think (like I do) that interest rates will come down, investing in the top high-quality dividend stocks out there should provide added upside when yields eventually do come down. That’s because these bond-like proxies tend to outperform as investors search for higher yields (lower yields on Treasurys and other bonds pushing investors toward stocks). And given that this ETF tracks the Dow Jones U.S. Dividend 100 Index, that’s good news for investors who demand quality as a key factor in their portfolios.
With most of the ETF’s holdings including companies with solid dividend growth track records and balance sheet stability, this remains one of my top ETF ideas in this market.
Schwab U.S. Broad Market ETF (SCHB)
Diversifying one’s portfolio on the basis of asset type (dividend, growth, value, etc.) is great. But holding broader exposure to the overall market (at least as a baseline) is also important. As such, finding a true “broad market” ETF such as the Schwab U.S. Broad Market ETF (SCHB) is important for investors looking to go the passive investing route. With an expense ratio of just 0.03%, this is an ETF that certainly fits the bill for investors of all sizes. Personally, I look for such index funds with rock-bottom expense ratios (sub 5 basis points) as a way to maximize the compounding I can expect over a multi-decade investing window.
Aside from the ETF’s 0.03% expense ratio, I think the fund’s broad exposure to a mix of large, mid and small-cap stocks is enticing. For investors who are unsure of which direction the market is likely to be headed over the next decade or so, holding broader exposure to the overall U.S. economy is probably a good idea. If the Mag 7 stocks everyone holds so dear fall out of bed, that’s okay – this fund provides plenty of exposure to mid and small cap names.
With the SCHB ETF seeing strong inflows (which I expect to continue given the fund’s historical returns as well as its dividend yield), this is an ETF all equity holders should consider as a potential cornerstone holding, in my view.
Schwab International Equity ETF (SCHF)
So, we’ve got the broad U.S. market and a host of dividend stocks covered. What’s next on our list of sectors or areas of the economy to gain exposure to?
Well, given the U.S.-heavy nature of the first two picks on my list, I’d certainly recommend that most long-term investors at least consider some exposure to international stocks. The Schwab International Equity ETF (SCHF) focuses on developed international economies (excluding the U.S. and Canada), allowing investors who have loaded up on ETFs such as the first two I mentioned on this list to capitalize on the truly global market environment we live in.
After the Trump administration announced their tariffs would in fact be put in place, we saw an interesting period where international stocks outperformed U.S. stocks by a large margin. For investors concerned about the medium to long-term economic picture in the U.S., diversifying one’s portfolio even further can be a good thing. That’s to say nothing of the fact that most developed international markets come alongside much lower valuation multiples and better dividend yields than the U.S. market does.
Overall, I think these three ETFs serve most long-term investors well in their journey, and I wish you a prosperous one.
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