SCHD vs S&P 500 Performance Calculator

Since SCHD's inception in October 2011, both SCHD and the S&P 500 have delivered similar total returns, with SCHD slightly outperforming by about 0.26% annually (13.47% vs. 13.21%). However, performance varies significantly depending on the time period examined:

• During growth-oriented markets (like 2017-2021), the S&P 500 has often outperformed SCHD
• During value-oriented markets or downturns (like 2022), SCHD has typically outperformed
• SCHD has historically provided higher dividend income throughout, which becomes significant when compounded over time

It's important to note that SCHD has achieved its returns with less volatility than the S&P 500, resulting in a higher risk-adjusted return (Sharpe ratio).

Both can be excellent choices for long-term investors, but your decision should depend on your financial goals:

• Choose SCHD if: You prioritize dividend income, prefer lower volatility, want exposure to quality value stocks, or are approaching retirement and want to build an income stream
• Choose S&P 500 if: You want broader market exposure, prefer a single "set it and forget it" investment, want maximum diversification, or are in early wealth accumulation phases where income is less important

Many financial advisors recommend owning both, as they complement each other well. The S&P 500 provides broad market exposure including growth stocks, while SCHD enhances the portfolio's income and provides exposure to quality dividend growers.

During market downturns, SCHD has typically demonstrated better downside protection compared to the S&P 500:

• In the 2020 COVID crash, SCHD fell approximately 35% from peak to trough, compared to 34% for the S&P 500 (similar performance)
• In the 2022 bear market, SCHD fell about 15% while the S&P 500 dropped nearly 25% (SCHD outperformed)
• SCHD's focus on companies with strong balance sheets and cash flows generally provides better resilience during economic uncertainty

The dividend income from SCHD also tends to be more stable during market corrections, as quality dividend-paying companies typically maintain or increase their dividends even during challenging economic periods. This provides a psychological benefit to investors and a source of returns independent of price movements.

The ideal allocation between SCHD and S&P 500 depends on your investment goals, time horizon, and risk tolerance. Here are some common allocation approaches:

• Balanced Approach: 50% SCHD / 50% S&P 500 – Provides a blend of growth and income
• Income Focus: 70% SCHD / 30% S&P 500 – Higher dividend yield while maintaining some broad market exposure
• Growth Focus: 30% SCHD / 70% S&P 500 – Emphasizes growth while enhancing yield above the S&P 500 alone

As you approach retirement, consider gradually shifting more toward SCHD to increase your portfolio's income generation. Use the calculator above to model different allocation scenarios and see how they affect both growth and income over your investment timeline.

Both SCHD and S&P 500 ETFs offer tax efficiency, but there are some important differences to consider:

• Qualified Dividends: 100% of SCHD's dividends are typically qualified, eligible for lower tax rates. The S&P 500 ETFs usually have 90-95% qualified dividends.
• Dividend Frequency: SCHD pays dividends quarterly, while most S&P 500 ETFs also pay quarterly.
• Tax Location: SCHD may be more advantageous in taxable accounts due to its qualified dividend treatment. However, if you're reinvesting all dividends, a tax-advantaged account can be beneficial for either investment.
• Tax Impact of Higher Yield: SCHD's higher yield means more taxable dividend income each year, which could be a consideration for investors in higher tax brackets with investments in taxable accounts.

For most investors, the tax differences are modest. Investment strategy and goals should be the primary considerations in choosing between these ETFs.