Two Completely Different Investment Strategies
VOO and SCHD both hold U.S. stocks, but they answer fundamentally different questions. VOO asks: "What does the entire large-cap U.S. market return?" SCHD asks: "Which high-quality companies pay reliable, growing dividends?"
VOO tracks the S&P 500 Index — a market-cap-weighted collection of roughly 500 of the largest U.S. companies, selected by committee based on size, liquidity, and profitability. It includes everything from high-growth tech companies that pay no dividend (Amazon, Tesla, Alphabet) to steady dividend payers (Johnson & Johnson, Procter & Gamble, Coca-Cola). The result is a broad representation of the U.S. large-cap market. For a complete breakdown of what makes VOO tick, see our guide to the Vanguard S&P 500 ETF.
SCHD tracks the Dow Jones U.S. Dividend 100 Index, which starts with U.S. companies that have paid dividends for at least 10 consecutive years and then screens for quality: cash flow to debt, return on equity, dividend yield, and 5-year dividend growth rate. The final index holds roughly 104 stocks, heavily weighted toward mature, profitable businesses in sectors like financials, healthcare, industrials, and consumer staples.
The practical difference is stark. VOO's top holdings are Apple, Microsoft, NVIDIA, and Amazon — companies valued for their growth trajectories. SCHD's top holdings include Cisco, BlackRock, Home Depot, and AbbVie — companies valued for their consistent cash returns to shareholders. There is roughly 30% overlap between the two funds, concentrated in large-cap dividend payers that also happen to be in the S&P 500.
Expense Ratio: Both Are Cheap, VOO Is Cheaper
VOO charges 0.03% per year. SCHD charges 0.06%. Both are well below the average equity ETF fee of around 0.44%, so neither fund is expensive by any measure.
The fee gap of 0.03% is half the size of the VOO vs SPY gap. On a $100,000 investment, it amounts to about $30 per year — or roughly $2,200 over 30 years assuming 8% returns. That is meaningful but unlikely to be the deciding factor. If SCHD's dividend income strategy fits your needs better, the extra 0.03% is well worth paying.
Both funds use the same open-end ETF structure, so there is no structural disadvantage with SCHD — it can reinvest dividends, lend securities, and benefit from in-kind redemptions just like VOO.
Dividend Yield: SCHD's Core Advantage
This is where SCHD separates itself. SCHD yields approximately 3.5% compared to VOO's approximately 1.2%. That is nearly a 3x difference in current income.
On a $500,000 portfolio, that gap looks like this:
| Portfolio | VOO Income | SCHD Income | Difference |
|---|---|---|---|
| $100,000 | ~$1,200 | ~$3,500 | +$2,300 |
| $500,000 | ~$6,000 | ~$17,500 | +$11,500 |
| $1,000,000 | ~$12,000 | ~$35,000 | +$23,000 |
SCHD also boasts stronger dividend growth. Over the past five years, SCHD has grown its per-share distribution at roughly 12% annually, compared to approximately 6% for VOO. This means SCHD's yield on cost — the yield relative to your original purchase price — improves faster over time. An investor who bought SCHD five years ago is earning significantly more on their initial investment than someone who bought VOO at the same time.
For a detailed look at how VOO's dividends have evolved over time, visit the VOO dividend history and yield page. You can also model future dividend income with the dividend income calculator.
Total Return: VOO's Growth Engine Wins
Higher dividends don't mean higher total returns. When you combine price appreciation with reinvested dividends, VOO has outperformed SCHD over most time periods.
| Period | VOO | SCHD | Difference |
|---|---|---|---|
| 2025 | +17.8% | +4.5% | +13.3% VOO |
| 2024 | +25.0% | +10.0% | +15.0% VOO |
| 2023 | +26.3% | -2.7% | +29.0% VOO |
| 2022 | -18.2% | -5.6% | +12.6% SCHD |
| 2021 | +28.8% | +29.6% | +0.8% SCHD |
| 10Y Ann. | ~13.1% | ~10.8% | ~2.3% VOO |
Returns include reinvested dividends. Data as of . Past performance does not guarantee future results. Sources: StockAnalysis.com, Yahoo Finance.
The pattern is clear: in growth-driven markets (2023, 2024, 2025), VOO's tech-heavy composition dramatically outperforms SCHD. When tech sells off and value rotates in (2022, parts of 2021), SCHD holds up better or even wins.
Over a full decade, VOO's annualized return of approximately 13.1% versus SCHD's approximately 10.8% translates into a large dollar difference. A $100,000 investment 10 years ago would be worth roughly $342,000 in VOO versus $279,000 in SCHD — a gap of approximately $63,000. Use our returns calculator to model any historical investment period with actual VOO prices.
Sector Exposure: Completely Different Portfolios
This is where the strategic difference between VOO and SCHD becomes most visible. The two funds look nothing alike under the hood.
| Sector | VOO Weight | SCHD Weight |
|---|---|---|
| Technology | ~32% | ~11% |
| Financials | ~14% | ~18% |
| Healthcare | ~11% | ~16% |
| Industrials | ~8% | ~15% |
| Consumer Staples | ~6% | ~13% |
| Energy | ~3% | ~10% |
| Consumer Discretionary | ~10% | ~4% |
| Communication Services | ~9% | ~4% |
VOO is a technology bet wrapped in an index fund. Its top three positions (Apple, Microsoft, NVIDIA) account for roughly 19% of the entire fund. When tech stocks rally, VOO soars. When tech corrects, VOO falls harder than the average diversified fund. You can see VOO's current top positions on the holdings page.
SCHD is a value and income bet. It underweights tech and overweights sectors where companies generate steady cash flows and return them to shareholders: financials, healthcare, industrials, consumer staples, and energy. This gives SCHD a value tilt that behaves differently from the broad market during sector rotations.
The practical implication: if you already hold VOO (or a broad market index like VTI) and add SCHD, you are meaningfully diversifying your sector exposure. You are reducing tech concentration and adding more industrials, energy, and consumer staples. This is one reason many investors hold both funds rather than choosing one over the other.
Drawdown Protection: SCHD Holds Up Better in Sell-Offs
Dividend stocks have historically provided a cushion during market downturns, and SCHD is no exception.
In 2022, when the S&P 500 fell 18.2% and growth stocks were hit particularly hard, SCHD declined only 5.6%. That 12.6% gap is enormous. An investor with $500,000 in VOO lost approximately $91,000 on paper that year. The same amount in SCHD lost about $28,000. The psychological difference between those two experiences matters for portfolio adherence — investors who panic-sell during drawdowns often lock in losses and miss the recovery.
However, SCHD's downside protection comes with a cost: it misses the strongest growth rallies. In 2023, when AI enthusiasm and tech-led growth pushed the S&P 500 up 26.3%, SCHD actually fell 2.7%. That is a nearly 29% performance gap in a single year. The missed upside in strong bull markets is the price you pay for smoother ride in downturns.
The takeaway: SCHD reduces portfolio volatility, but it does not eliminate risk. In a broad systemic crash, both funds will decline. SCHD simply tends to decline less because its holdings generate stable cash flows that partially support their stock prices even when growth expectations collapse.
The Case for Holding Both: VOO + SCHD
Rather than treating VOO and SCHD as an either/or decision, many investors pair them. Common allocations include:
Growth-focused (70% VOO / 30% SCHD): Maintains high total-return exposure through VOO while adding a meaningful dividend stream through SCHD. Suitable for investors in the accumulation phase (ages 25–50) who want some income diversification without sacrificing too much growth.
Balanced (50% VOO / 50% SCHD): Splits the difference between growth and income. Produces a portfolio yield around 2.3% while still participating in broad market growth. Suitable for investors approaching retirement who are transitioning from pure growth to income.
Income-focused (30% VOO / 70% SCHD): Prioritizes dividend income with some growth exposure for inflation protection. Suitable for retirees or investors in the distribution phase who live primarily off investment income.
The overlap between VOO and SCHD is approximately 30% by holdings, which is low enough that combining them provides genuine diversification benefit. You are not just paying two expense ratios for the same stocks — you are getting meaningfully different sector and factor exposure.
Which Should You Buy?
Choose VOO if you: have a time horizon of 10+ years and want maximum total return; are in the accumulation phase and don't need income now; want broad U.S. large-cap exposure across all sectors; are comfortable with higher volatility (including 18%+ drawdowns); or are investing in a tax-advantaged retirement account and prioritize growth.
Choose SCHD if you: need dividend income for living expenses or supplemental cash flow; want lower portfolio volatility and smaller drawdowns; prefer value-oriented companies with proven profitability; are building a dividend growth portfolio that compounds income over time; or are retired or near retirement and transitioning from growth to income.
Hold both if you: want to balance growth and income in a single portfolio; want to reduce tech concentration without abandoning market-cap indexing; are a pre-retiree gradually increasing income exposure; or want sector diversification across value and growth factors.
This is not a case where one fund is objectively better. VOO and SCHD serve different purposes. The right choice depends entirely on whether you need maximum total return or meaningful current income, and where you are in your investing life. For a broader look at how VOO compares to other ETFs, visit the full comparison hub.
Frequently Asked Questions
Is VOO or SCHD better for long-term investing?
It depends on your goal. VOO has delivered higher total returns over most time periods because the S&P 500 includes high-growth companies that reinvest earnings rather than paying dividends. SCHD has delivered lower total returns but higher dividend income, making it better for investors who need cash flow now rather than maximum growth.
Can I hold both VOO and SCHD?
Yes, and many investors do. There is roughly 30% overlap in holdings, since many large dividend payers in SCHD are also in the S&P 500. Holding both gives you broad market exposure through VOO and a dividend income tilt through SCHD. A common split is 70% VOO and 30% SCHD.
Why is SCHD's dividend yield so much higher than VOO's?
SCHD specifically selects stocks based on dividend quality — companies with at least 10 consecutive years of dividend payments, strong cash flow, and high yield relative to peers. VOO holds the entire S&P 500 including growth companies like Amazon, Tesla, and Meta that pay little or no dividend, which dilutes its overall yield.
Does SCHD outperform VOO in bear markets?
Often, but not always. In 2022, SCHD fell about 5.6% while VOO dropped 18.2%. Dividend-focused stocks tend to be mature, profitable companies with stable earnings that hold up better in corrections. However, this is not guaranteed — in the 2020 COVID crash, both fell sharply. SCHD's lower volatility comes at the cost of missing the strongest growth rallies.
Is SCHD good for retirement income?
SCHD is popular among retirees specifically because it generates meaningful income without selling shares. Its yield of roughly 3.5% means a $500,000 investment produces about $17,500 in annual dividends. However, relying solely on dividends may not keep pace with inflation — a total return approach using VOO with systematic withdrawals can also work well. Many retirees combine both strategies.