Considering a choice between investing in individual stocks and the Schwab US Dividend Equity ETF? Here's the lowdown.
The Schwab US Dividend Equity ETF (SCHD) is currently lagging behind the S&P 500 index, but this may not be a cause for concern for income-focused investors.
With an expense ratio of just 0.06%, the SCHD is a cost-effective investment option. The ETF tracks the Dow Jones U.S. Dividend 100 index, which comprises 100 high dividend-yielding U.S. companies that have paid dividends for at least 10 consecutive years. The selection process considers free cash flow to debt, return on equity, dividend yield, and five-year dividend growth rate, resulting in a portfolio blending dividend growth, quality, and yield characteristics.
The SCHD may not be the best choice for investors primarily interested in growth or value investments. However, it provides both income and growth to investors with a well-diversified portfolio.
In contrast, the Motley Fool Stock Advisor's list of the 10 best stocks could produce significant returns in the coming years. The analyst team's previous top picks, such as Netflix and Nvidia, have demonstrated impressive returns. However, the latest top 10 list is only accessible to Stock Advisor members.
It's important to note that the returns of the Motley Fool Stock Advisor's top picks are based on August 26, 2025. Furthermore, most of the S&P 500's recent gains have been driven by a small number of large technology companies, which don't offer particularly attractive yields.
The SCHD, on the other hand, may be a suitable solution for income investors looking for a well-designed ETF product to buy so they can stop worrying about picking stocks. The total average return of the Motley Fool Stock Advisor is 1,049%, which is a market-crushing outperformance compared to 185% for the S&P 500.
The index's list of components is reviewed and updated annually. As of the current price, the Schwab US Dividend Equity ETF has a dividend yield of approximately 3.9%.
In conclusion, the Schwab US Dividend Equity ETF offers a low-cost, diversified income solution for investors. While it may not match the returns of growth-focused investments, it provides a steady stream of income and potential growth, making it an attractive option for income-focused investors.
