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

The Schwab U.S. Large-Cap Value ETF (SCHV) aims to offer broad exposure to the Large Cap Value sector within the U.S. equity market. This passively managed exchange-traded fund (ETF) was introduced on December 11, 2009, and is managed by Charles Schwab.

With assets exceeding $11.54 billion, SCHV positions itself as one of the larger ETFs focused on the Large Cap Value segment of the market.

Understanding Large Cap Value

Large cap companies are generally defined as those with a market capitalization exceeding $10 billion. These firms tend to be more stable, displaying predictable cash flows and often exhibiting less volatility compared to their mid and small-cap counterparts.

Value stocks are characterized by lower price-to-earnings (P/E) and price-to-book (P/B) ratios. They also often show lower sales and earnings growth rates compared to growth stocks. Historically, value stocks have outperformed growth stocks across various market conditions, though they may lag behind growth stocks during robust bull markets.

Cost Effectiveness

For investors, it is crucial to consider an ETF's expense ratio. Typically, lower-cost products yield better performance than their higher-cost alternatives, assuming other factors remain constant.

The SCHV ETF boasts an annual operating expense of just 0.04%, making it one of the most cost-effective options in its category. It also provides a trailing dividend yield of 2.28% over the last year.

Sector Distribution and Major Holdings

Before making investment decisions, it is essential to examine an ETF's holdings, despite their many advantages such as diversified exposure, which mitigates single-stock risk. Most ETFs, including SCHV, are transparent in their holdings, often updating them daily.

A significant portion of SCHV’s portfolio, approximately 22.80%, is allocated to the Financials sector. Following this, the Industrials and Healthcare sectors are also well-represented within the fund.

In terms of individual assets, Berkshire Hathaway Inc Class B (BRK/B) makes up about 3.45% of the total assets, with JPMorgan Chase (JPM) and Exxon Mobil Corp (XOM) as other key holdings. The top ten holdings collectively account for approximately 18.48% of the fund’s total assets.

Performance Metrics and Risk Assessment

SCHV seeks 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 is float-adjusted and market capitalization-weighted, representing the large-cap value portion of the broader U.S. Total Stock Market.

As of January 13, 2025, the ETF has seen a slight decline of about -1.15% this year, but has gained roughly 13.01% over the past year. In the last 52 weeks, SCHV has traded within a price range of $22.94 to $28.11.

With a beta of 0.94 and a standard deviation of 14.78% over the previous three years, SCHV is considered a medium-risk investment option. It holds around 528 different stocks, effectively minimizing company-specific risks.

Possible Alternatives

The Schwab U.S. Large-Cap Value ETF holds a Zacks ETF Rank of 2 (Buy), which is determined based on expected asset class returns, expense ratios, momentum, and other relevant factors. This makes it a strong choice for those looking to enter the Style Box - Large Cap Value segment of the market. There are alternative ETFs available that investors might also consider.

For instance, the Schwab U.S. Dividend Equity ETF (SCHD) and the Vanguard Value ETF (VTV) follow similar market indexes. The Schwab U.S. Dividend Equity ETF, with $65.19 billion in assets, charges an expense ratio of 0.06%. In contrast, the Vanguard Value ETF manages $127.21 billion and has an expense ratio of 0.04%.

Conclusion

Both retail and institutional investors are increasingly drawn to passively managed ETFs for their low cost, transparency, flexibility, and tax efficiency. These attributes make them excellent investment vehicles for long-term investors.

For more information on SCHV and other ETFs, investors are encouraged to screen for products that align with their investment goals and stay updated on the latest developments in the ETF investment landscape.

ETFs, Investing, Stocks