Schwab U.S. Large-Cap ETF (SCHX)

Schwab U.S. Large-Cap ETF (SCHX) Overview

Profile:

Schwab U.S. Large-Cap ETF (SCHX) is a passively managed exchange-traded fund that tracks the performance of the Dow Jones U.S. Large-Cap Total Stock Market Index. This index comprises the largest 750 publicly traded companies in the United States, representing over 95% of the investable U.S. equity market. SCHX offers broad market exposure to the large-cap segment of the U.S. stock market.

Objective:

The primary goal of SCHX is to replicate the performance of the Dow Jones U.S. Large-Cap Total Stock Market Index, before fees and expenses. This means the ETF aims to deliver returns that closely align with the overall market performance of U.S. large-cap stocks.

Issuer:

Schwab Asset Management, Inc., a subsidiary of The Charles Schwab Corporation, is the issuer of SCHX.

• Reputation and Reliability: Schwab is a well-established and reputable financial institution with a long history of serving investors. The firm manages over $7 trillion in client assets and is known for its low-cost investment products and excellent customer service.
• Management: The ETF is overseen by a team of experienced portfolio managers with extensive knowledge of the U.S. equity market. The investment team utilizes quantitative analysis and indexing methodologies to ensure the portfolio accurately tracks the target index.

Market Share and Size:

• Market Share: SCHX holds a significant portion of the U.S. large-cap ETF market. With over $130 billion in assets under management, it ranks among the top ten largest large-cap ETFs in the U.S.
• Total Net Assets: As of October 2023, SCHX has approximately $131 billion in total net assets.

Moat:

The ETF's primary competitive advantage lies in its low expense ratio and efficient replication of the target index.

• Low Expenses: SCHX boasts one of the lowest expense ratios in the large-cap ETF space, currently at 0.03%. This translates to significant cost savings for investors compared to many actively managed mutual funds.
• Efficient Tracking: The ETF closely tracks the performance of the Dow Jones U.S. Large-Cap Total Stock Market Index, minimizing tracking error and delivering returns consistent with the broader market.

Financial Performance:

• Historical Returns: SCHX has historically delivered returns in line with the broader U.S. large-cap market. Over the past five years, the ETF has generated an annualized return of approximately 12%, closely mirroring the performance of the S&P 500 index.
• Benchmark Comparison: Compared to its benchmark, the Dow Jones U.S. Large-Cap Total Stock Market Index, SCHX has demonstrated minimal tracking error, indicating its effectiveness in replicating the index performance.

Growth Trajectory:

In line with the general market growth, SCHX has experienced consistent growth in both assets under management and trading volume. This suggests increasing investor demand for low-cost, diversified exposure to the U.S. large-cap market.

Liquidity:

• Average Trading Volume: With an average daily trading volume exceeding 5 million shares, SCHX offers high liquidity, ensuring investors can easily buy and sell shares throughout the trading day.
• Bid-Ask Spread: The bid-ask spread for SCHX is typically tight, indicating low transaction costs associated with trading the ETF.

Market Dynamics:

Factors impacting the ETF's market environment include overall economic conditions, interest rate fluctuations, and sector performance within the U.S. large-cap space.

Competitors:

Key competitors include:

• iShares CORE S&P 500 (IVV): 16.4% market share
• Vanguard S&P 500 ETF (VOO): 13.6% market share
• SPDR S&P 500 ETF Trust (SPY): 8.9% market share

Expense Ratio:

SCHX has an expense ratio of 0.03%, significantly lower than many of its competitors.

Investment Approach and Strategy:

• Strategy: SCHX employs a passive, indexing strategy, aiming to replicate the composition and performance of the Dow Jones U.S. Large-Cap Total Stock Market Index.
• Composition: The ETF holds a diversified portfolio of approximately 750 large-cap U.S. stocks across various sectors, ensuring broad market exposure.

Key Points:

• Low-cost, tax-efficient access to the U.S. large-cap market.
• Diversified portfolio of 750+ leading U.S. companies.
• Closely tracks the target benchmark with minimal tracking error.
• High liquidity and tight bid-ask spread for easy trading.

Risks:

• Market risk: The ETF's performance is influenced by general market conditions and volatility in the U.S. large-cap sector.
• Interest rate risk: Rising interest rates can impact the valuations of large-cap companies, leading to potential price declines for the ETF.
• Sector concentration: The ETF's focus on large-cap stocks limits exposure to potential growth opportunities in other market segments.

Who Should Consider Investing:

• Investors seeking broad diversification and low-cost exposure to the U.S. large-cap market.
• Long-term investors with a buy-and-hold approach.
• Investors looking for a passive and tax-efficient investment strategy.

Fundamental Rating Based on AI:

Based on an AI analysis of various factors like financial health, market positioning, and future prospects, SCHX receives a Fundamental Rating of 8.5 out of 10.

This high rating is supported by the ETF's low expense ratio, strong market share, robust asset size, and close alignment with its benchmark index. Additionally, the ETF's underlying holdings consist of financially healthy and established companies, providing a reliable foundation for long-term returns.

Resources and Disclaimers:

• Data Source:

Information included in this analysis is sourced from the following:

• Schwab Asset Management website: https://www.schwab.com/etfs/schx

• Yahoo Finance: https://finance.yahoo.com/quote/SCHX/

• Morningstar: https://www.morningstar.com/etfs/xnas/schx/quote

• ETF Database: https://etfdb.com/etf/SCHX/

• Disclaimer:

This information is intended for informational purposes only and should not be construed as financial advice. It is essential to conduct thorough research and consult with financial professionals before making any investment decisions.