Should Schwab U.S. Large-Cap Value ETF (SCHV) Be on Your Investing Radar?

The Schwab U.S. Large-Cap Value ETF (SCHV) is designed to give investors wide exposure to large-cap value stocks within 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 ranks among the larger ETFs focused on the large-cap value segment of the U.S. market.

Understanding Large-Cap Value

Large-cap companies, defined as those with a market capitalization over $10 billion, generally represent stable businesses that provide predictable cash flows. These companies are often less volatile compared to their mid and small-cap counterparts.

Value stocks are characterized by lower price-to-earnings and price-to-book ratios. They also show lower sales and earnings growth rates on average. Historically, value stocks have outperformed growth stocks in most market environments, although they may lag behind during strong bull markets.

Cost Efficiency

When considering ETFs, the expense ratio is a vital factor. ETFs with lower costs tend to yield better returns compared to those with higher expenses, assuming all other factors remain equal.

The Schwab U.S. Large-Cap Value ETF boasts an impressively low annual operating expense ratio of just 0.04%, positioning it as one of the most cost-effective options in its category.

Additionally, it provides a trailing 12-month dividend yield of 2.28%, which can be attractive for income-focused investors.

Sector Breakdown and Key Holdings

Assessing an ETF's holdings is crucial for potential investors, despite the significant advantages these funds offer through diversified exposure, which mitigates individual stock risk. Most ETFs maintain transparency and disclose their holdings daily.

SCHV allocates approximately 22.80% of its portfolio to the Financials sector, which is its largest sector exposure. The Industrials and Healthcare sectors follow closely behind.

In terms of individual holdings, Berkshire Hathaway Inc Class B (BRK/B) contributes around 3.45% to the total assets, with JPMorgan Chase (JPM) and Exxon Mobil Corp (XOM) also featured prominently. The top 10 holdings collectively make up about 18.48% of the ETF's total assets.

Performance Metrics and Risk Assessment

SCHV aims to replicate the performance of the Dow Jones U.S. Large-Cap Value Total Stock Market Index before any fees and expenses. This benchmark is a float-adjusted, market capitalization-weighted index that represents the large-cap value component of the broader Dow Jones U.S. Total Stock Market Index.

As of January 13, 2025, SCHV has experienced a year-to-date decline of approximately 1.15% but has increased around 13.01% over the past year. The ETF's price has fluctuated between $22.94 and $28.11 during the previous 52-week period.

With a beta of 0.94 and a standard deviation of 14.78% over the trailing three years, SCHV is classified as a medium-risk investment option. It offers significant diversification with about 528 total holdings, helping to minimize specific company risks.

Exploring Alternatives

With a Zacks ETF Rank of 2 (Buy), SCHV stands out as a favorable choice for investors wanting access to the large-cap value segment. However, there are other ETFs that may also suit your investment goals.

For instance, the Schwab U.S. Dividend Equity ETF (SCHD) and Vanguard Value ETF (VTV) track similar indices. SCHD has roughly $65.19 billion in assets, while VTV boasts $127.21 billion. The expense ratios for SCHD and VTV are 0.06% and 0.04%, respectively.

Conclusion

Both retail and institutional investors are increasingly favoring passively managed ETFs due to their cost-effectiveness, transparency, adaptability, and tax efficiency. Such funds can serve as excellent investment vehicles for those with long-term strategies.

To delve further into this ETF and others, consider screening for products that align with your investment objectives, and keep abreast of the latest trends in the ETF landscape.

ETF, Investing, Value