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

For investors seeking exposure to the Large Cap Value segment of the U.S. equity market, the Schwab U.S. Large-Cap Value ETF (SCHV - Free Report) is a noteworthy option. Launched on December 11, 2009, this ETF is passively managed and designed to provide broad market exposure.

Sponsored by Charles Schwab, SCHV has grown its assets to over $11.54 billion, positioning it among the larger ETFs targeting large-cap value stocks in the U.S.

Understanding Large Cap Value

Large-cap companies usually have market capitalizations exceeding $10 billion. These companies tend to be stable, showcasing predictable cash flows and generally lower volatility compared to smaller counterparts.

Value stocks are characterized by lower-than-average price-to-earnings and price-to-book ratios, coupled with slower sales and earnings growth rates. Historically, value stocks have outperformed growth stocks across various markets, although they may lag in strong bull markets.

Cost Considerations

Expense ratios are crucial for investors evaluating ETFs since lower costs typically lead to better returns if all other metrics stay constant.

SCHV boasts a remarkably low annual operating expense ratio of just 0.04%, making it one of the most cost-efficient options available. Additionally, it provides a 12-month trailing dividend yield of 2.28%.

Portfolio Breakdown and Major Holdings

Before making investment decisions, it's essential for investors to review an ETF's holdings, despite the common benefits of diversified exposure provided by ETFs that minimize individual stock risk. Most ETFs, including SCHV, offer transparency by disclosing their holdings daily.

The largest sector represented in SCHV is Financials, comprising about 22.80% of the total portfolio, followed by Industrials and Healthcare.

Among its top holdings, Berkshire Hathaway Inc. Class B (BRK/B) makes up roughly 3.45% of total assets, with J.P. Morgan Chase (JPM - Free Report) and Exxon Mobil Corp (XOM - Free Report) also featuring prominently. The top ten holdings collectively account for around 18.48% of the fund's overall assets.

Performance Insights and Risk Assessment

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 encompasses the large-cap value segment within the broader U.S. Total Stock Market Index.

As of January 13, 2025, SCHV has recorded a year-to-date decrease of approximately -1.15% but has increased about 13.01% over the past year. In the last 52 weeks, the ETF has fluctuated between $22.94 and $28.11.

With a beta of 0.94 and a standard deviation of 14.78% over the trailing three-year period, SCHV is considered a medium-risk option within the ETF space. The fund contains approximately 528 individual holdings, effectively spreading company-specific risk.

Exploring Alternatives

With a Zacks ETF Rank of 2 (Buy), SCHV is an appealing choice for those interested in the Large Cap Value style box category, based on factors like expected return, expense ratio, and momentum. Investors might also consider alternative ETFs within this sector.

Among potential alternatives are the Schwab U.S. Dividend Equity ETF (SCHD - Free Report) and the Vanguard Value ETF (VTV - Free Report). The former commands assets totaling $65.19 billion, while the latter has $127.21 billion. SCHD features an expense ratio of 0.06%, and VTV maintains a cost of 0.04%.

Conclusion

Both retail and institutional investors are increasingly inclined toward passively managed ETFs due to their cost-effectiveness, transparency, flexibility, and tax efficiency. Such funds serve as strong investment vehicles for long-term investors as they build their portfolios.

To delve deeper into this ETF and explore other investment products, it is essential to assess options according to individual investment goals and keep abreast of trends in the ETF investment landscape.

ETF, Investing, Value