I have $3,000 to invest: Should I go all in on SCHD or mix it with VOO?

The market climate at the time of this writing can be described in a number of ways, but “boring” is certainly not one of them. Ever since President Donald Trump announced his policy of reciprocal tariffs to level the international trade playing field, the stock and bond markets have both become cyclonic in their volatility. 2,000+ point intraday swings in either direction on the Dow Jones Average and a 50 basis point swing for the 10-year Treasury Bond yield in less than a month have given even veteran investors bouts of nausea.

As a result, investors from all levels of experience are looking at their portfolios and considering reassessment of their holdings, at least to better handle the current volatility and to reduce the sleepless nights of worry. 

Navigating Through A Huge Menu Of Selections

A relatively new investor with $3,000 to invest was seeking vehicle suggestions, and posted a question on Reddit.  He was considering the following, but was open to any other suggestions:

• He was considering investing in the Schwab US Dividend Equity ETF (NYSE: SCHD) based on what he’d read from other posts.
• The poster was looking to contribute $100 per week to take advantage of compounding and dollar cost averaging.
• Admittedly young and inexperienced, he did understand how investing for the long-term was to his advantage, so he was not seeking quick, short-term gains.
• He was concerned with putting all of his cookies in a single basket, so was inquiring about opinions on diversifying an allocation into the Vanguard S&P 500 ETF (NYSE: VOO).

To his credit, the poster realizes now that the Millennial FIRE (Financial Independence Retire Early) meme of “VOO and chill” might not be an appropriate direction to take in the current climate. Nevertheless, he acknowledges the long-term track record of the S&P 500 and how it has benefited millions who have contributed to it regularly and let it compound to build wealth. As the poster has already established long term goals, assessing risk tolerance is probably the next factor to identify before finalizing his course of action. Taking a closer look at SCHD and VOO is probably a prudent step to accomplish this step. (All market quote details are as of the time of this writing.)

Schwab US Dividend Equity ETF

The Schwab US Dividend Equity ETF is an exchange traded fund that is designed to track The Dow Jones U.S. Dividend 100 Index. 

Sector wise, SCHD’s top 5 heaviest weighted industrial areas are:

1. Energy – 21.12%
2. Consumer Defensive – 19.04%
3. Health Care – 15.65%
4. Industrials – 10.53%
5. Technology – 9.76%

The top 5 weighted holdings in SCHD are:

1. Verizon Communications – 4.51%
2. Coca-Cola – 4.46%
3. Lockheed Martin – 4.26%
4. Altria Group – 4.20%
5. ConocoPhillips – 4.19% 

Vanguard S&P 500 ETF 

The Vanguard S&P 500 ETF is a favorite of Warren Buffett and many FIRE (Financial Independence, Retire Early) devotees. Its tracking of the S&P 500 index has delivered sizable double digit growth for millions of portfolios over the past several years. 

Top 5 Sector Weightings:

• Technology – 31.03%
• Financial Services – 14.15%
• Healthcare – 11.20%
• Consumer Cyclical – 10.36%
• Communication Services – 9.34%

The top 5 largest holdings include: 

• Apple – 7.03%
• Microsoft – 5.88%
• Nvidia – 5.59%
• Amazon – 3.78%
• Meta Platforms (Facebook) – 2.66%

Helpful Insights

As one might expect, a number of the respondents agreed that some diversification was a good idea, as was the plan to invest a new contribution every week.  Some of the the specifics included:

• Due to his youth, some suggested that it would behoove the poster to focus more on growth, and suggested SCHG (Schwab Large Cap Growth ETF), which has a superior ROI history over SCHD. In either case, reinvesting dividends to leverage compounding over the long haul was advised.
• Some lauded the dividend consideration, since the extra income could serve as a safety net in the event that the poster’s job were to be in jeopardy in the future. 
• Another respondent agreed with adding VOO, but also including an ETF for international exposure so that in the event of a US economic downturn, there would be non-US holdings that could potentially offset any bearishness from the other holdings. 

This article is intended for informational purposes. Any need for more in-depth advice should come from a financial professional.

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