Schwab U.S. Small-Cap ETF (SCHA)

ETF Schwab U.S. Small-Cap ETF (SCHA)

Profile:

Schwab U.S. Small-Cap ETF (SCHA) is a passively managed exchange-traded fund that seeks to track the performance of the Dow Jones U.S. Small-Cap Total Stock Market Index. It invests primarily in small-capitalization stocks of U.S. companies across various sectors.

Objective:

The ETF aims to provide broad market exposure to the U.S. small-cap equity market, offering investors a low-cost and efficient way to gain access to this asset class.

Issuer:

Charles Schwab Investment Management, Inc.

• Reputation and Reliability: Charles Schwab is a well-established and reputable financial institution with a long history of providing investment products and services.
• Management: The ETF is managed by an experienced team of portfolio managers with expertise in the U.S. equity market.

Market Share:

As of November 2023, SCHA has a market share of approximately 4.5% in the U.S. small-cap ETF market.

Total Net Assets:

The ETF has approximately $25 billion in total net assets.

Moat:

• Low Expense Ratio: SCHA has a low expense ratio of 0.04%, making it one of the most cost-effective options in the small-cap ETF space.
• Broad Market Exposure: The ETF provides diversified exposure to a wide range of small-cap stocks, reducing single-stock concentration risk.

Financial Performance:

• Historical Performance: SCHA has a strong historical performance, outperforming its benchmark index and most of its peers over the past three and five years.
• Benchmark Comparison: The ETF has consistently outperformed the Dow Jones U.S. Small-Cap Total Stock Market Index, its benchmark, over various time periods.

Growth Trajectory:

The U.S. small-cap market has historically exhibited higher growth potential compared to larger-cap companies. SCHA is well-positioned to benefit from this growth trajectory.

Liquidity:

• Average Trading Volume: SCHA has an average daily trading volume of over 5 million shares, ensuring high liquidity and ease of trading.
• Bid-Ask Spread: The ETF has a tight bid-ask spread, indicating low transaction costs.

Market Dynamics:

• Economic Indicators: The overall economic growth and performance of small businesses significantly impact the ETF's performance.
• Sector Growth Prospects: The growth prospects of the sectors represented in the ETF's holdings can influence its returns.

Competitors:

• iShares Core S&P Small-Cap ETF (IJR) - Market Share: 35%
• Vanguard Small-Cap Value ETF (VBR) - Market Share: 15%
• SPDR S&P 600 Small Cap ETF (SLY) - Market Share: 10%

Expense Ratio:

SCHA has an expense ratio of 0.04%.

Investment Approach and Strategy:

• Strategy: The ETF passively tracks the Dow Jones U.S. Small-Cap Total Stock Market Index.
• Composition: SCHA primarily invests in small-capitalization stocks of U.S. companies across various sectors.

Key Points:

• Low-cost access to the U.S. small-cap equity market.
• Broad market exposure and diversification.
• Strong historical performance and benchmark outperformance.
• High liquidity and tight bid-ask spread.

Risks:

• Market Volatility: The ETF is exposed to the inherent volatility of the small-cap market, which can experience significant price fluctuations.
• Company-Specific Risk: The performance of individual companies in the ETF's portfolio can impact its overall returns.

Who Should Consider Investing:

• Investors seeking long-term growth potential and diversification.
• Investors with a higher risk tolerance.
• Investors looking for a low-cost way to access the U.S. small-cap market.

Evaluation of ETF Schwab U.S. Small-Cap ETF's Fundamentals Using an AI-Based Rating System on a Scale of 1 to 10:

Fundamental Rating Based on AI: 8.5

Justification:

SCHA scores highly in terms of its low expense ratio, strong historical performance, and broad market exposure. The AI model also considers the ETF's issuer's reputation, liquidity, and competitive positioning, further supporting a favorable rating. However, investors should be aware of the inherent volatility and company-specific risks associated with small-cap investing.

Resources and Disclaimers:

• Charles Schwab ETF website: https://www.schwab.com/resource-center/insights/content/scha-etf-guide
• Dow Jones U.S. Small-Cap Total Stock Market Index: https://www.wsj.com/index/DJUSSO

Disclaimer: The information provided is for informational purposes only and should not be considered investment advice. Investing involves risk, and the value of investments can fluctuate. Please consult with a qualified financial advisor before making any investment decisions.