Should You Consider the Schwab U.S. Large-Cap Value ETF (SCHV) for Your Portfolio?

The Schwab U.S. Large-Cap Value ETF (SCHV - Free Report) aims to provide extensive exposure to the Large Cap Value sector of the U.S. equity market. This passively managed exchange-traded fund was launched on December 11, 2009, and is sponsored by Charles Schwab.

With assets exceeding $11.54 billion, SCHV stands as one of the larger ETFs focused on matching the Large Cap Value segment of the U.S. equity market.

Understanding Large Cap Value

Large cap companies are generally defined as those with a market capitalization exceeding $10 billion. These companies often exhibit stability, predictable cash flows, and typically show less volatility compared to mid and small cap firms.

Value stocks are considered to have lower-than-average price-to-earnings and price-to-book ratios. These stocks also tend to reflect lower sales and earnings growth rates. Over the long term, value stocks have outperformed growth stocks across various markets, although they may fall behind growth stocks during strong bull markets.

Cost Considerations

When investing in ETFs, it is crucial to examine the expense ratio. ETFs with lower costs generally yield better results over time compared to those with higher expenses, assuming all other factors remain unchanged.

The annual operating expenses for SCHV are just 0.04%, categorizing it among the most cost-effective options in its category.

Moreover, the ETF has a 12-month trailing dividend yield of 2.28%, adding to its appeal.

Sector Breakdown and Key Holdings

Before purchasing an ETF, it's wise to investigate its holdings. Despite the diversity and risk reduction that these funds offer, they remain products that require due diligence. Most ETFs provide transparency by disclosing their holdings daily.

In terms of sector allocation, SCHV has a significant focus on the Financials sector, which represents about 22.80% of the portfolio. The top three sectors also include Industrials and Healthcare.

Among its individual holdings, Berkshire Hathaway Inc Class B (BRK/B) constitutes approximately 3.45% of total assets, followed closely by major companies like Jpmorgan Chase (JPM - Free Report) and Exxon Mobil Corp (XOM - Free Report). Together, the top ten holdings make up about 18.48% of the total assets under management.

Performance Overview and Associated Risks

SCHV aims to replicate the performance of the Dow Jones U.S. Large-Cap Value Total Stock Market Index before accounting for fees and expenses. This index is a float-adjusted market capitalization weighted index that captures the large-cap value segment of the U.S. Total Stock Market Index.

As of January 13, 2025, the ETF has experienced a slight decline of -1.15% so far this year but has risen by approximately 13.01% over the past year. In the last 52 weeks, SCHV's trading range has been between $22.94 and $28.11.

The ETF reports a beta of 0.94, with a standard deviation of 14.78% over the trailing three-year period, placing it in the medium-risk category. With around 528 holdings, SCHV effectively mitigates company-specific risk.

Considering Alternatives

The Schwab U.S. Large-Cap Value ETF has garnered a Zacks ETF Rank of 2 (Buy), which considers factors such as expected asset class return, expense ratio, and momentum. As a result, SCHV is a solid choice for investors who are looking for exposure to the Style Box - Large Cap Value segment. There are other EFTs available in this sector that investors might explore as well.

Notable alternatives include the Schwab U.S. Dividend Equity ETF (SCHD - Free Report) and the Vanguard Value ETF (VTV - Free Report). The Schwab U.S. Dividend Equity ETF boasts $65.19 billion in assets, while the Vanguard Value ETF has approximately $127.21 billion. Both funds maintain relatively low expense ratios, with SCHD at 0.06% and VTV charging 0.04%.

Final Thoughts

A growing number of retail and institutional investors are gravitating toward passively managed ETFs, primarily due to their low costs, transparency, flexibility, and tax efficiency. These investment vehicles are particularly advantageous for long-term investors.

For further insights about SCHV and other ETFs, it is advisable to evaluate various products aligned with your investment goals and stay informed on the latest trends in the ETF investment landscape.

ETF, Investing, Stocks