The 1 Costly Mistake Income Investors Make When They Buy SCHD
The Schwab U.S. Dividend Equity ETF is a popular choice for investors seeking dividend income and long-term growth.
The Schwab U.S. Dividend Equity ETF (SCHD) is a popular dividend-focused ETF, but investors may make a costly mistake when adding it to their portfolio. Despite its high-quality holdings and low expense ratio, SCHD's concentration in a few large companies can create potential risks for income investors. Its top 10 holdings account for over 42% of the fund's value, including well-known dividend payers like Procter & Gamble, Coca-Cola, Chevron, and Home Depot.
Investors should be cautious not to over-allocate to these companies, especially if they already hold shares in them. Additionally, SCHD has a higher weighting in certain sectors, such as consumer staples, healthcare, and energy. Before investing in SCHD or increasing an existing position, investors should evaluate how the fund's holdings could impact their portfolio's diversification.
By understanding their current holdings and how SCHD fits into their overall strategy, investors can avoid taking on more concentrated risks than they intended.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
