VOO vs SCHD: Which ETF Is Better for Long-Term Investors?

VOO and SCHD are two of the most popular ETFs for long-term investors — but they answer two very different questions. VOO (Vanguard S&P 500 ETF) asks: what does the entire US stock market earn? SCHD (Schwab U.S. Dividend Equity ETF) asks: which financially healthy companies can I count on for growing dividend income?

Both are excellent ETFs. Both have delivered strong long-term results. The choice between them is not about quality — it's about what you are optimising for. This guide uses real historical data to compare them across every dimension that matters.

The core difference

VOO tracks the S&P 500 — the 500 largest US companies by market capitalisation. It holds everything: technology giants, healthcare conglomerates, financial institutions, consumer brands, energy companies, and everything in between. It makes no judgment about dividend history, payout ratios, or financial quality. If a company is large enough to be in the S&P 500, VOO holds it, weighted by its market cap. Apple and Microsoft together represent roughly 13–15% of the entire fund.

SCHD tracks the Dow Jones U.S. Dividend 100 Index — a rules-based index that requires candidates to have paid dividends for at least 10 consecutive years, strong free cash flow relative to total debt, solid return on equity, and above-average dividend yield relative to sector peers. From qualifying companies, the 100 highest-scoring stocks are selected. The result is a compact portfolio of financially mature, shareholder-friendly businesses concentrated in financials, healthcare, consumer staples, industrials, and energy.

The most important consequence of these different approaches: VOO is heavily influenced by a small number of mega-cap technology companies. SCHD is deliberately diversified, with no technology company typically making up more than 5% of the fund — and the technology sector as a whole representing a much smaller slice than in the S&P 500.

Quick comparison: VOO vs SCHD at a glance

Historical returns: what the data shows

VOO and SCHD have delivered surprisingly similar long-term total returns — this is what makes the comparison genuinely interesting and more nuanced than VOO vs QQQ. Over the full period since SCHD's inception through end of 2024, both ETFs have delivered roughly 12–14% annualised total returns with dividends reinvested, with VOO holding a modest edge in most periods.

The significant difference between them is not in total return — it is in how those returns are delivered and the volatility experienced along the way. VOO's return comes mostly from price appreciation with a small dividend component. SCHD's return is split more evenly between price gains and a much larger growing dividend. This distinction matters enormously depending on whether you are accumulating wealth or drawing income from your portfolio.

Annual returns: year-by-year comparison

The table below shows total return (price appreciation plus dividends reinvested) for each calendar year since SCHD's inception in late 2011. All figures are approximate and based on publicly available data.

The pattern here is more balanced than most investors expect. SCHD won 5 of the 13 years shown, including some of the most important defensive years — 2014, 2016, 2017, 2021, and decisively 2022. VOO won in the strong bull years driven by technology (2020, 2023, 2024) and in the flat-to-mild years (2012, 2013, 2015, 2018, 2019).

The most striking divergence is 2023, when VOO returned +26.3% versus SCHD's +6.9%. This gap was almost entirely driven by the surge in mega-cap AI-related technology stocks (Nvidia, Microsoft, Apple, Meta) that dominate VOO but are largely absent from SCHD's dividend-focused index. This is the key structural risk of SCHD: when technology leads the market by a wide margin, SCHD will meaningfully lag.

The yield gap: why it matters more than most investors think

SCHD's dividend yield is roughly 2.2–2.5 times higher than VOO's. On a $200,000 portfolio, that gap translates to approximately $4,000–$5,000 per year in additional income. Over 10 years, assuming SCHD's dividends grow at their historical 11% annual rate and VOO's grow at their historical 5–6%, the income difference compounds into a very substantial figure.

Consider a $100,000 initial investment in each, with dividends reinvested, over 10 years:

This is why SCHD is so compelling for income-focused investors. The starting yield advantage compounds into a massive income difference over time. An investor who purchased SCHD at inception in late 2011 is now receiving dividends at a yield-on-cost well above 10% on their original investment — because SCHD has raised its per-share dividend roughly 10-fold over that period. To understand the mechanics behind this, see our guide on yield on cost.

Risk and volatility: a meaningful difference

VOO's beta is approximately 1.0 — it moves in line with the market, as you would expect from a fund that essentially is the market. SCHD's beta of approximately 0.7 means it typically moves about 30% less than the market in both directions. In a 20% market decline, you would expect VOO to fall roughly 20% and SCHD to fall roughly 14%. In practice, the 2022 data shows an even bigger gap: VOO fell 18.2%, SCHD fell only 5.5%.

This lower volatility is a structural feature of SCHD's construction. Screening for financial quality — companies with strong free cash flow, low debt, and consistent dividend payments — naturally selects for defensive businesses with stable earnings. These are precisely the types of companies that hold up better during economic stress: consumer staples companies that sell food and household products, healthcare firms providing essential services, and financials that benefit from rising interest rates.

For investors who are retired or within 10 years of retirement, SCHD's lower volatility is not just a psychological comfort — it has real financial consequences. A large drawdown in the early years of retirement, when you are beginning to withdraw from your portfolio, can permanently impair your portfolio's recovery capacity. This is called sequence-of-returns risk, and SCHD's lower drawdown profile directly reduces it.

Sector differences: where VOO and SCHD diverge most

Technology is the single most important factor separating these two ETFs. The S&P 500 that VOO tracks has a technology weighting of roughly 30–32%, driven by the enormous market capitalisations of Apple, Microsoft, Nvidia, Alphabet, and Meta. When technology performs well — as it did in 2020, 2023, and 2024 — VOO benefits enormously. When technology sells off — as in 2022 — VOO suffers disproportionately.

SCHD's technology exposure is much lower, typically around 8–12%. Many of the largest technology companies either do not pay dividends or have dividend histories too short to qualify for SCHD's index. Instead, SCHD concentrates in sectors that generate reliable cash flows for dividend payments: financials (~20%), healthcare (~15%), consumer staples (~13%), industrials (~13%), and energy (~10%).

This means VOO and SCHD perform very differently across economic environments. Rising rate environments (2022) favour SCHD's financials and value orientation. Technology bull markets (2023, 2024) favour VOO's heavy tech weighting. Neither is definitively superior in all conditions — they rotate leadership based on which part of the market the economic environment rewards.

Expense ratios and the cost advantage

VOO's 0.03% expense ratio is one of the lowest available on any ETF in the world. SCHD's 0.06% is effectively double — but both are so low that the practical difference is minimal for most investors. On a $100,000 portfolio, VOO costs $30 per year versus SCHD's $60. On $500,000, it's $150 versus $300.

Compare this to the industry average actively managed mutual fund, which charges 0.6–1.0% annually. In that context, both VOO and SCHD are exceptionally cheap to own. The expense ratio argument is compelling when comparing either of these to active funds — but between VOO and SCHD themselves, it is not a meaningful differentiator.

One cost consideration that does matter more: transaction costs. Both ETFs have extremely tight bid-ask spreads and high liquidity, so purchase and sale costs are negligible. VOO's much larger assets under management (~$600B+ vs SCHD's ~$65B) gives it slightly better institutional liquidity, but for individual investors buying and holding, this distinction is irrelevant in practice.

Income vs. total return: the real question

The VOO vs SCHD debate ultimately comes down to a question about how you want to build and consume wealth — not just which number is bigger.

If you are in the accumulation phase with 20+ years until you need the money, VOO's slightly higher total return in most long periods means your ending portfolio value will likely be larger. The lower yield matters less because you are reinvesting everything anyway. VOO's simplicity — hold the whole market, pay almost nothing, never think about it — is a genuine virtue. It is the basis of decades of evidence-based investing research.

If you are approaching or in retirement, SCHD's higher yield and lower volatility offer practical advantages. A portfolio generating 3.5% in dividends can cover a significant portion of living expenses without requiring you to sell shares. In years when the market drops 20%, SCHD's income keeps arriving — and SCHD's historically lower drawdown means less portfolio damage at exactly the moment you can least afford it. For a deeper look at this approach, see our guide on how to live off dividends.

If you want dividend growth over time, SCHD's 11% annual dividend growth rate is nearly double the historical S&P 500 dividend growth rate. Buying SCHD today at a 3.5% yield and holding for 15 years means — if historical growth rates continue — you could be collecting close to 14–15% yield on cost on your original investment. No other mainstream dividend ETF has delivered this combination of starting yield and growth consistency.

Who should choose VOO — and who should choose SCHD

Can you hold both VOO and SCHD?

Yes — and this combination is widely used by investors who want broad market exposure alongside a growing income stream. Because SCHD's holdings are largely a subset of S&P 500 companies, there is meaningful overlap in individual stocks. However, the two ETFs produce meaningfully different portfolio characteristics when combined.

A 70% VOO / 30% SCHD blend gives you near-total-market exposure while adding a dividend income component that the pure S&P 500 index doesn't provide. It also reduces technology concentration slightly relative to a 100% VOO portfolio. At 50/50, you get a portfolio with roughly 2.3–2.5% yield — about halfway between the two — and a materially lower volatility profile than pure VOO.

Many dividend investors hold VOO in their tax-advantaged accounts (where the low yield matters less and total return compounding is the goal) and SCHD in taxable accounts (where the growing qualified dividends are taxed at the favourable 0–15% long-term rate). This account-location strategy can meaningfully improve after-tax outcomes over long periods. For more on this topic, see our guide on how dividends are taxed.

Frequently asked questions