SCHD (Schwab U.S. Dividend Equity ETF) used to be untouchable in dividend circles.
Low expense ratio.
Quarterly income.
“Sleep well at night” investing.
But let’s stop pretending nothing has changed.
SCHD is no longer just underperforming. It’s falling behind — badly.
And the longer investors cling to it as a core holding, the more expensive that decision becomes.
The Hard Truth: SCHD Is Built for the Past, Not the Present
SCHD is engineered to prioritize:
- Dividend consistency
- Cash flow stability
- Mature, slow-growing businesses
What it deliberately avoids:
- High-growth companies
- Aggressive reinvestment
- Innovation-heavy sectors
That design worked when markets rewarded stability.
Today’s market rewards growth. And SCHD doesn’t compete there.
SCHD vs Growth: The Performance Gap Is No Longer Small
Let’s remove feelings and look at outcomes.
5-Year Total Return Comparison (Illustrative)
| Investment | Approx. Annual Return | Growth of 1,000,000 |
|---|---|---|
| SCHD | ~8% | ~1,469,000 |
| S&P 500 ETF | ~13% | ~1,842,000 |
| Growth ETF (e.g., QQQ-style) | ~17% | ~2,192,000 |
That’s not a rounding error.
That’s:
- 373,000 less vs S&P 500
- 723,000 less vs growth
And this assumes dividends are reinvested perfectly.
“But SCHD Pays Dividends” — Let’s Address That Excuse
Yes, SCHD pays dividends.
Now let’s see what that actually does.
Dividend Yield vs Capital Growth
| ETF Type | Dividend Yield | Price Growth |
|---|---|---|
| SCHD | High (3–4%) | Low to Moderate |
| S&P 500 | Low (1–2%) | Strong |
| Growth ETFs | Very Low | Very Strong |
Dividend yield feels good emotionally.
But markets compound total return, not income streams.
If price barely moves, dividends are just a consolation prize.
Opportunity Cost: The Real Loss Nobody Tracks
SCHD investors often say:
“I’m okay with lower returns. I want stability.”
What they don’t say:
“I’m okay missing out on hundreds of thousands over a decade.”
10-Year Opportunity Cost (1,000,000 Investment)
| Strategy | Estimated Value |
|---|---|
| SCHD-heavy portfolio | ~2.1M |
| Balanced (S&P 500 tilt) | ~3.0M |
| Growth-oriented | ~4.5M+ |
That gap doesn’t show up on your dividend statement.
It shows up when:
- You retire later than planned
- Your portfolio can’t keep up with inflation
- You realize “safe” quietly meant “slow”
SCHD’s Sector Problem Nobody Wants to Talk About
SCHD is overweight in:
- Consumer staples
- Financials
- Old-line industrials
Underweight in:
- Technology
- AI-related infrastructure
- High-margin growth businesses
This means SCHD:
- Misses innovation cycles
- Lags during expansion phases
- Only looks good during downturns
If your main ETF only shines when markets struggle, that’s not balance — that’s pessimism baked into your portfolio.
Who SCHD Actually Makes Sense For (Be Honest)
SCHD still works if you are:
- Retired or semi-retired
- Living off cash flow
- Prioritizing income predictability
- Already financially secure
SCHD does not make sense if you are:
- In accumulation mode
- Decades away from retirement
- Trying to maximize long-term wealth
- Still building your net worth
Using SCHD as a core holding while young is not conservative.
It’s financially inefficient.
The Dividend Illusion: Why Investors Refuse to Let Go
Dividends give psychological comfort:
- You feel “paid”
- You don’t need to sell shares
- It feels like passive income
But comfort is not a strategy.
Many SCHD investors aren’t optimizing returns — they’re avoiding volatility.
And avoiding volatility during growth cycles is how you end up underperforming for years.
A Smarter Way to Use SCHD (If You Insist)
If you still want SCHD:
- Use it as a minor stabilizer
- Not as your main growth engine
- Not as your largest holding
SCHD should support a portfolio — not define it.
Blogger’s Corner
SCHD didn’t fail.
The market moved on.
Clinging to SCHD today feels a lot like insisting on flip phones in the smartphone era — reliable, familiar, and quietly obsolete.
Dividend investing isn’t wrong.
But confusing income with progress is.
And right now, SCHD isn’t leading anyone forward.