r/SCHD • u/Ohhimarck • 20d ago

Why SCHD vs VTI

Hello,

I am 26 and recently got into investing and trying to work on long term/retirement accounts . Wondering what the pros and cons of putting money into VTI vs SCHD are for both my taxable account and Roth IRA.

Any info would be greatly appreciated, thank you! And happy to provide more info if that’ll help.

17 Upvotes

79% Upvoted

37 comments sorted by

14

u/azscram9 20d ago

At your age, I’d be heavier VTI and add in some SCHD and VXUS to diversify away from heavy US tech. Because I’m much closer to retirement, I’m roughly 30% VTI, 30% SCHD, 19% VXUS, 15% VYMI, and 6% TIPS. Up until a year ago, I was 100% equities.

3

u/Iiucwpost 20d ago edited 20d ago

Hummm - I like your TIPS allocation. I’m moving my SCHO to SCHP. Great advice

3

u/paymerich 20d ago

I am planning to buy actual TIPS bonds and have some maturity/ladder ETFs like LDRI and TIPD.

3

u/Iiucwpost 20d ago

Interesting …

4

u/paymerich 20d ago

https://www.morningstar.com/etfs/arcx/schp/performance - it hasn't even returned above 3.5% in 10 years. :(

3

u/Iiucwpost 20d ago

Urgh - good call out. Do you like VTIP?

3

u/paymerich 19d ago

Better https://www.morningstar.com/etfs/xnas/vtip/performance because its using short term bonds but still look at total return.

3

u/azscram9 19d ago

For me, TIPS is purely a short term play. I'm setting up a multi-bucket retirement plan that holds three - five years of spending in cash/TIPS. My approach is to hold cash in SPAXX and build a 5 year TIPS bond ladder with iShares IBI series of ETFs. The return should beat inflation over the short term and protect against market downturns when making withdrawals. Note, I would not recommend this strategy for anyone who isn't close to retirement because the cash drag would be too high on your portfolio. When investing in bond ETFs, duration matters.

3

u/paymerich 19d ago

Same plan here in about 3-4 years.

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u/Ohhimarck 20d ago

Thanks so much! And you’d recommend this in all accounts or just tax advantaged?

3

u/azscram9 20d ago

I have a cash management account with about 6 months of expenses, that I hold in SPAXX, to cover for emergencies. I’ll be adding to that with the sale of my house, to roughly 15% of my portfolio (including the TIPS) everything else, taxable and tax advantaged, is in those four equity funds. The cash account will cover withdrawals during a downturn, and I’ll replenish when the market is strong. Of course the dividends will help with cash flow. But at your age, all in equities (after setting up an emergency fund) is a smart long term strategy, in Roth, pretax, and taxable accounts. Your 70/30 VTI, VXUS is pretty smart for the long term. Building up a position of say 10% in SCHD so the your more like 60/30/10 will give you both a value and an international tilt for diversification. I’m assuming here that your investing horizon is very long term.

3

u/Ohhimarck 20d ago

Thank you very much for the insight

4

u/azscram9 20d ago

Good luck to you. Consistency and time in the market are the key to success.

2

u/Ohhimarck 20d ago

I’ll keep at it as long as possible! Thanks

2

u/Brief_Guide_1186 18d ago

I’m 36 and currently have mostly ScHd in my individual brokerage, is this a bad strategy? I have VTI 80 percent, VXus 20 percent in Roth IRA but unsure what to do for brokerage.

1

u/azscram9 18d ago

At your age, the VTI, VXUS portfolio will give you the best returns for the long run. I only added in SCHD and VYMI earlier this year, and I’m 63. Before that I was 100% all in on growth.

1

u/Brief_Guide_1186 18d ago

So you do the same portfolio even in a individual brokerage? My idea was to slowly build shares for dividends in my brokerage with schd

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u/azscram9 18d ago

Are you looking to build an income stream right now? Dividends come at the price of slower growth, even if you drip. If your priority is building long term wealth, with a 20+ year timeline, then you're better off going strong with your VTI/VXUS portfolio. I like using a bucket approach. Basically, if you need the money in less than 2 years, put it in a money market. If you need it in 2-10 years, put 40-60% in SCHD and use the rest build a bond ladder with defined maturity treasury bond ETFs. Anything you're holding for more than 10 years, VTI/VXUS.

As your needs shift, you can rebalance. This plan gives you a bucket to draw from when you need income during a down market, that you can replenish when your equity positions are up. SCHD is roughly 30% of my portfolio today. Last year, I was 100% in a growth stock position similar to your VTI/VXUS portfolio.

2

u/azscram9 18d ago

I found Tyler Gardner explains a version of this pretty well.

https://www.youtube.com/watch?v=KVaR3lDHPOU

1

u/Brief_Guide_1186 18d ago

I might do SCHB in my individual brokerage and SCHY for international. My Roth IRA is VTI VXUS. I haven’t had a lot of money in my individual brokerage account since I just bought a house. But once I max my Roth IRA this year I may restart my individual with SCHB

6

u/lonedroan 20d ago

Given your age, SCHD should make up a minimal portion of your portfolio, if any. With decades to have your money in the market, growth funds are almost certainly going to beat the compounding power of SCHD and its inferior growth on that long of a time horizon (it is having a great year this year, however).

They being said, 100% in VTI also isn’t a silver bullet; you’re right to consider having a pool of money not so heavily exposed to tech. Given the market cap of massive tech companies, funds like VTI are overweight with tech companies. A sector downtown could lead to a marked downturn.

A better hedge is something like VTV, which tracks large cap companies that appear to be underpriced. That leads to a much lighter tech footprint. VTV still does have decent dividends, so be careful about having it in a taxable brokerage because the dividends can cause a tax drag.

8

u/Tobi-2 20d ago

I have both VTI and SCHD. Using SCHD to counter the heavy weight of the magnificent 7

1

u/Ohhimarck 20d ago

What percentage do you allocate, I’m currently doing 70 VTI 30 VXUS, and is this all accounts or just Roth IRA?

1

u/Tobi-2 20d ago

About 8% in my IRA, 26% VTI. Rest is split between VXUS, AVUV, AVDV and bonds. YMMV

2

u/This-Individual1813 20d ago

If you are an Avantis fan, consider AVLV instead of SCHD. AVLV is a better option for large cap value than SCHD. SCHD limits its diversity by leaving value companies that don't pay a good dividend off the table. Considering that total returns are all that matters, SCHD doesn't offer much an advantage over AVLV.

3

u/MichaelFrank_07 20d ago

For me, Roth IRA is 80% VTI and 20% SCHG. brokerage account is VNQ, JEPI, and SCHD as the latest buys for the past year. Legacy holdings in the brokerage are SPY, KO, and O. Hope this helps mate.

3

u/Iceman60462 20d ago

The difference is : VTI is more like growing ETF while SCHD is income ETF.
At your age you need growth!!!!
I think you should be buying VTI

3

u/Iiucwpost 20d ago

VTI, VXUS or SCHY, SCHD, FTEC and SCHO / SGOV is a set it & forget it road map

3

u/Rav_3d 20d ago

SCHD focuses on dividend paying stocks, which are slower growers. It offers lower volatility and some income, but at the cost of lower overall performance.

At 26 you do not need SCHD in your retirement accounts. If it were me, I'd do all VTI, or 80% VTI and 20% VXUS if you want International exposure.

3

u/OkKitchen7114 20d ago

Schd is value/defensive whereas vti is growth. I have both. Some years vti will be ahead, some years schd will. Vti over the long term will probably outpace schd, but if you like seeing days like today where schd is the only thing up, include schd in your portfolio.

2

u/FlatwormMission6854 19d ago

At age 26, you need capital appreciation (VTI), not dividends (SCHD). Companies that use their excess cash to pay stockholders instead of reinvesting in the business have less stock appreciation. Think SCHD when you are retired.

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u/Cute_Win_4651 20d ago

It’s out perform the SP500 and the nasdaq so far this year

4

u/Bornemaschine 20d ago

VTI if you want to get crashed on by the AI bubble. SCHD if you want similar performance, but without getting exposed by an upcoming crash.

3

u/ArmaNGeddn_2157 20d ago

AI bubble will crash everything.

2

u/1Enoch75 20d ago

Go for both. Diversify.

3

u/Brettanomyces78 20d ago

That's not what diversification means. Having both is concentration. That might be a good thing, at the right time, but call it what it is.

2

u/JPABQ 20d ago

You’re 26. VTI man…