The Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) is one of my favorite dividend ETFs. Even if we look across the span of domestic equity, rather than only dividend focused funds, SCHD is one of the best. There are a few good options for investors, ignoring the current high price on equity indexes. To be clear from the start, this article is not going to focus on the current price of domestic equity exposure. This is going to focus on how what exposures SCHD holds and how those companies fit with my investment strategies for the “core” part of a portfolio.
The S&P 500 and SCHD Allocations
Below you’ll see a chart for the S&P 500:
The chart below shows the sector allocation:
The heaviest allocations are technology, financial services, and health care.
Now take a look at SCHD for the equity allocations by sector:
Okay, the huge allocation to technology remains. However, the health care allocations are dramatically lower in favor of “consumer defensive”. Those are the kinds of stocks I feel comfortable holding. These are generally companies that are producing products consumers happily buy for themselves. They buy the products whether the economy is booming or in recession. I’m a defensive investor by nature, to so this allocation strategy suits me. While I choose my own stocks for most of my portfolio, when I do decide to grab some diversified exposure, this strategy keeps it within my desired allocation strategy.
The lack of real estate doesn’t bother me at all because I cover REITs (real estate investment trusts) and am happy to pick my own companies there. The lack of financial services can be a little challenging because ideally a portfolio would have at least some allocations to companies that see income increase when the Federal Reserve jacks up rates. The banking sector in general benefits substantially from higher rates. The S&P 500 has a ton of exposure there, but SCHD has very little.
I think the other big point for investors in SCHD is simply to…