Back to top

Image: Bigstock

Should Schwab U.S. Small-Cap ETF (SCHA) Be on Your Investing Radar?

Read MoreHide Full Article

If you're interested in broad exposure to the Small Cap Blend segment of the US equity market, look no further than the Schwab U.S. Small-Cap ETF (SCHA - Free Report) , a passively managed exchange traded fund launched on 11/03/2009.

The fund is sponsored by Charles Schwab. It has amassed assets over $14.31 billion, making it one of the largest ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.04%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.57%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 19% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Super Micro Computer Inc (SMCI - Free Report) accounts for about 0.37% of total assets, followed by Lattice Semiconductor Corp (LSCC - Free Report) and Churchill Downs Inc (CHDN - Free Report) .

The top 10 holdings account for about 2.29% of total assets under management.

Performance and Risk

SCHA seeks to match the performance of the Dow Jones U.S. Small-Cap Total Stock Market Index before fees and expenses. The Dow Jones U.S. Small-Cap Total Stock Market Index includes the small-cap portion of the Dow Jones U.S. Total Stock Market Index actually available to investors in the marketplace.

The ETF has gained about 3.23% so far this year and is up roughly 5.11% in the last one year (as of 09/22/2023). In the past 52-week period, it has traded between $37.65 and $46.36.

The ETF has a beta of 1.18 and standard deviation of 22.97% for the trailing three-year period, making it a medium risk choice in the space. With about 1752 holdings, it effectively diversifies company-specific risk.

Alternatives

Schwab U.S. Small-Cap ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, SCHA is a great option for investors seeking exposure to the Style Box - Small Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell 2000 ETF (IWM - Free Report) and the iShares Core S&P Small-Cap ETF (IJR - Free Report) track a similar index. While iShares Russell 2000 ETF has $49.85 billion in assets, iShares Core S&P Small-Cap ETF has $66.68 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Published in