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

The Schwab U.S. Large-Cap Value ETF (SCHV - Free Report) is designed to offer extensive exposure to the Large Cap Value sector of the U.S. equity market. This exchange traded fund began its journey on December 11, 2009, and is actively managed by Charles Schwab. With assets exceeding $11.54 billion, SCHV stands as one of the larger ETFs that aim to track the performance of the Large Cap Value segment.

Why Large Cap Value?

Large cap stocks usually possess a market capitalization of over $10 billion. These stocks are often associated with stable and mature companies that exhibit predictable cash flow, leading to lesser volatility compared to mid and small cap stocks. On the other hand, value stocks are characterized by their lower than average price-to-earnings and price-to-book ratios, along with below-average sales and earnings growth rates. Historically, value stocks have shown better long-term returns compared to growth stocks, although they may lag during strong bullish markets.

Costs

When choosing an ETF, it is crucial to consider the expense ratio, as lower-cost ETFs tend to yield better returns than their higher-cost counterparts, assuming other metrics remain constant. The SCHV boasts an impressively low annual operating expense ratio of just 0.04%, thereby making it a cost-effective option. Furthermore, it has a trailing 12-month dividend yield of 2.28%.

Sector Exposure and Top Holdings

Before investing in an ETF, understanding its holdings is essential, despite the advantages that these funds provide, such as diversified exposure that mitigates single stock risk. Most ETFs, including SCHV, are transparent and disclose their holdings on a daily basis. SCHV primarily invests in the Financials sector, accounting for approximately 22.80% of its total portfolio, followed by Industrials and Healthcare.

Among its individual holdings, Berkshire Hathaway Inc Class B (BRK/B) represents about 3.45% of total assets, with other significant investments in Jpmorgan Chase (JPM - Free Report) and Exxon Mobil Corp (XOM - Free Report). Collectively, the top ten holdings make up approximately 18.48% of the entire asset base.

Performance and Risk

SCHV aims to mirror the performance of the Dow Jones U.S. Large-Cap Value Total Stock Market Index, before fees and expenses. This index represents the large-cap value component of the broader Dow Jones U.S. Total Stock Market Index, adjusted for float and market capitalization. As of January 13, 2025, SCHV has experienced a year-to-date decline of around -1.15% but has gained about 13.01% over the past year. It has traded within a range of $22.94 to $28.11 over the last 52 weeks.

With a beta of 0.94 and a standard deviation of 14.78% over the trailing three-year period, SCHV portrays a medium risk profile within the ETF space. Featuring approximately 528 holdings, it effectively reduces company-specific risk.

Alternatives

The Schwab U.S. Large-Cap Value ETF holds a Zacks ETF Rank of 2 (Buy), indicating favorable expectations based on asset class returns, expense ratios, and momentum. Consequently, SCHV is an outstanding pick for investors aiming for exposure to the Large Cap Value section of the market. However, other ETFs in this space are worth considering as well.

For instance, the Schwab U.S. Dividend Equity ETF (SCHD - Free Report) and the Vanguard Value ETF (VTV - Free Report) track similar indices. The Schwab U.S. Dividend Equity ETF boasts $65.19 billion in assets, while the Vanguard Value ETF has $127.21 billion under management. Both SCHD and VTV have expense ratios of 0.06% and 0.04%, respectively.

Bottom Line

Investors, both retail and institutional, are increasingly favoring passively managed ETFs due to their low costs, transparency, flexibility, and tax efficiency, making them attractive vehicles for long-term investment. For additional details about this ETF and other investment products, consider screening for options that align with your investment goals and staying up to date with the latest developments in the ETF landscape.

ETF, Investment, Finance