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The
Schwab U.S. Large-Cap ETF (
NYSEARCA:SCHX)
stands out as an attractive investment opportunity for its minimal fees, diversified portfolio of large-cap,
blue-chip U.S. stocks, and the solid returns it has generated over the years. Therefore, let’s take a look at this $32.8 billion large-cap fund from Charles Schwab (
NYSE:SCHW
).
What is the SCHX ETF’s Strategy?
Charles Schwab explains that SCHX’s “goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Total Stock Market Index.” Doing this gives investors “simple access to the 750 largest U.S. companies as ranked by full market capitalization.”
SCHX's Holdings
One thing that I really like about the Schwab U.S. Large-Cap ETF is that it offers investors real diversification. One way that SCHX does this is by holding positions in 755 stocks. However, many funds own a lot of stocks but are less diversified than this would imply because their top holdings account for a large portion of the fund, often greater than 50% or even higher.
That isn’t the case at all with SCHX, which offers true diversification in that its top 10 holdings account for just 28.4% of the fund. By holding an extra 250 or so stocks, SCHX also offers a bit more diversification than the typical S&P 500 (
SPX
) fund.
Below, you’ll find an overview of
SCHX’s top 10 holdings using TipRanks’ holdings tool.
As its name implies, SCHX’s top 10 holdings consist of blue chip, large-cap U.S. stocks like Apple (
NASDAQ:AAPL
), Microsoft (
NASDAQ:MSFT
), Amazon (
NASDAQ:AMZN
), Nvidia (
NASDAQ:NVDA
) and Alphabet (
NASDAQ:GOOG
) (
NASDAQ:GOOGL
). While SCHX is not a tech ETF, its top holdings currently skew heavily toward technology because these are the largest stocks in the market right now.
But once you get outside of these top holdings, SCHX owns plenty of non-tech names, and its holdings run the gamut of the U.S. economy. In fact, breaking it down by sector, technology accounts for just 28% of SCHX's holdings.
Healthcare is the fund's second-largest sector with a weighting of 13.3%, and the sector is well-represented through the likes of UnitedHealth (
NYSE:UNH
), Eli Lilly (
NYSE:LLY
) and Johnson & Johnson (
NYSE:JNJ
). Financials come in third with a 12.7% weighting and include stocks like Berkshire Hathaway (
NYSE:BRK.B
), JPMorgan Chase (
NYSE:JPM
), Visa (
NYSE:V
), and Mastercard (
NYSE:MA
).
This well-rounded group of holdings enables investors to harness the power of a large portion of the U.S. economy in their portfolios using one ETF.
Is SCHX Stock a Buy, According to Analysts?
Turning to Wall Street, SCHX earns a Moderate Buy consensus rating based on 606 Buys, 138 Holds, and 11 Sell ratings assigned in the past three months. The
average SCHX stock price target of $61.05 implies 20.4% upside potential.
Get Smart
While Wall Street analysts are bullish on SCHX, so is TipRank’s Smart Score system. The
Smart Score is a proprietary quantitative stock scoring system created by TipRanks. It gives stocks a score from 1 to 10 based on eight market key factors. A score of 8 or above is equivalent to an Outperform rating. SCHX features an Outperform-equivalent ETF Smart Score of 8.
Long-Term Performance
In addition to its strong portfolio of diversified holdings, favorable consensus rating from analysts, and Outperform-equivalent Smart Score, SCHX also has a solid track record of long-term performance.
Over the past three years, SCHX has had an annualized return of 9.9% (as of the end of August). Over the past five years, SCHX’s annualized return stands at 10.8%, and over the past 10 years, it comes in at an even better 12.6%.
These results are roughly on par with those of the broader market over time, albeit trailing them by a narrow margin. The
SPDR S&P 500 ETF (
NYSEARCA:SPY)
, a good representation of the S&P 500 index, has returned 10.4% over the past three years, 11.0% over the past five years, and 12.7% over the past 10 years. While SPY narrowly beats SCHX over these time frames, the difference is relatively marginal (amounting to a 0.1% difference annualized over 10 years), and both ETFs have generated great returns for their investors.
Below, you'll find
a comparison of SCHX and SPY using TipRanks' ETF comparison tool, which allows investors to compare up to 20 ETFs at a time based on a wide variety of customizable factors.
Tiny Expense Ratio
SCHX is notable for its minuscule expense ratio of just 0.03%, which is just about as low as you will find in today’s market. This ultra-low expense ratio means that an investor putting $10,000 into SCHX would pay just $3 in fees during their first year of investing in the fund.
The effect of these savings really adds up over time. Assuming the fund returns 5% a year going forward and the expense ratio remains 0.03%, after three years, this same investor would pay just $10 in fees. After five years, this investor would pay just $17 in fees, and over the course of a decade, this investor would pay just a paltry $39 in fees. Investing in low-cost funds like SCHX is key for preserving the principal value of your portfolio over time.
Dividend Payout
It should also be noted that
SCHX is a dividend payer. While SCHX's dividend yield of 1.5% isn't enough to put it on the radar of income investors, it still adds to total returns over time. Furthermore, SCHX has been paying its holders a dividend for 13 consecutive years, and there is plenty of room for this dividend payout to grow over time as the companies it owns grow their earnings and increase their own payouts over the years.
Investor Takeaway
Ultimately, SCHX is an attractive option for investors to consider adding to their investment portfolios. The fund has produced double-digit annualized returns over the past decade. Additionally, it features a negligible expense ratio, and it gives investors plenty of diversification, both in terms of the large number of stocks that it holds and its low concentration towards its top 10 holdings.
Lastly, SCHX also enjoys a favorable outlook from analysts and an outperform-equivalent Smart Score from TipRanks. Altogether, there are plenty of reasons to like this ETF.
Disclosure
A $16 billion JP Morgan fund, expected to reset its options positions on Friday, is drawing traders' attention as a potential source of additional volatility at the end of the worst month for U.S. stocks this year.
Fintel reports that on September 28, 2023, Wedbush reiterated coverage of Amazon.com (NASDAQ:AMZN) with a Outperform recommendation. Analyst Price Forecast Suggests 37.57% Upside
Investors in Amazon.com Inc (Symbol: AMZN) saw new options become available today, for the November 10th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the AMZN options chain for the new November 10th contracts and identified one put and o
It’s not a stretch to say a generation, perhaps two, of investors are hardwired to believe technology isn’t the sector dividends investors should embrace. However, that scenario has markedly improved in recent years. Indeed, exchange traded funds such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM) sport tiny dividend yields. [...]
Read more at ETFTrends.com.
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