VTI is one of the largest ETFs and is a core holding of many portfolios, while SCHD is a popular dividend-oriented ETF. SCHD targets high-dividend stocks (as they are defined by the index provider). Even though VTI and SCHD play different roles in a portfolio, many investors compare the two funds in order to determine whether they should tilt their portfolio towards higher dividends or to stick with a broad-based index. Please read on for a comparison of SCHD vs VTI.
A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.
The Short Answer
SCHD focused on large-cap stocks that pay higher dividends, which also tend to be more value-oriented stocks. VTI owns a more diverse portfolio of all market caps and investment styles. Historical performance has been similar, but will depend on how the size and value factors perform moving forward.
The Longer Answer
Historical Performance: SCHD vs VTI
Since their common inception in 2011, performance has been relatively similar with an annualized difference of only .5%. This has compounded over time though and the cumulative performance differential is about 24%!
As the SCHD vs VTI chart shows, the value factor has really underperformed the broader market since their common inception. However, this did change in 2022 as lines begin to converge again. It is anyone’s guess whether growth or value will perform better in the future.
Differences Between SCHD and VTI
The primary difference between these two funds is that SCHD tracks the Dow Jones U.S. Dividend 100 Index, while VTI tracks the broader CRSP US Total Market Index.
For those wondering what stocks end up in SCHD’s portfolio, SCHD first filters out any stocks that have not paid dividends for at least 10 years. The remaining stocks are then filtered based on fundamental criteria and then position and sector caps are instituted to keep the portfolio diversified.
Geographic Exposure
Both SCHD and VTI hold essentially 100% US stocks, so I will not dig into country exposures or market classification here. For all intents and purposes, the two funds have identical country exposures.
Market Cap Exposure
Overall, the market cap exposures of SCHD and VTI are relatively similar.
| SCHD | VTI | |
| Large Cap | 79% | 72% |
| Mid Cap | 18% | 19% |
| Small Cap | 3% | 9% |
Sector Weights
There are some significant differences in sector weights, which makes sense based on the fact that SCHD is targeting the dividends and some sectors pay higher dividends.
| SCHD | VTI | |
| Basic Materials | 1.96% | 2.48% |
| Consumer Cyclical | 9.68% | 10.89% |
| Financial Services | 15.52% | 12.17% |
| Real Estate | 0.00% | 3.12% |
| Communication Services | 4.30% | 7.71% |
| Energy | 9.41% | 4.14% |
| Industrials | 18.34% | 9.53% |
| Technology | 12.23% | 27.80% |
| Consumer Defensive | 12.92% | 6.17% |
| Health Care | 15.34% | 13.50% |
| Utilities | 0.30% | 2.51% |
Expenses
SCHD’s expense ratio is .06%, while VTI’s expense ratio is .03%. Yes, SCHD is 2x more expensive than VTI, but we’re talking about 3 basis points! This in an non-issue in my opinion.
Transaction Costs
ETFs are free to trade at many brokers and custodians, so both SCHD and VTI should be free to trade in most cases. Additionally, these funds are among the largest ETFs and are very liquid. The bid-ask spread of both SCHD and VTI is very low, so individual investor trades will not generally be large enough to “move” the market.
Tax Efficiency & Capital Gain Distributions
ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). Neither SCHD nor VTI has ever made a capital gains distribution (nor do I expect them to moving forward). Thus, these funds are about as tax-efficient as any fund can be and either fund is appropriate in taxable accounts. SCHD does have a slightly higher tax drag from dividends, but its relatively small.
Final Thoughts: SCHD vs VTI
Both funds are great ETFs that do what they are designed to do. I would not personally use dividend ETFs as the core of a portfolio, but that is a personal opinion and not necessarily the consensus. For a core position, I would personally choose VTI every time. However, investors looking for a satellite position in order to tilt their portfolio towards value could do a lot worse than using SCHD. At the end of the day, these two funds are not necessarily comparable because they play slightly different roles in a portfolio.
