SCHB: Reliable, But Has Expensive Valuation

seekingalpha07-02

Torsten Asmus Thesis With the S&P 500 up more than 14% YTD, 2024 is shaping to be another year of overperformance, led by technology mega-caps. Broad market exposure has brought investors more than ...

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Broad market exposure has brought investors more than ...</p>\n\n<a href=\"https://seekingalpha.com/article/4702066-schb-broad-market-etf-investing-considerations\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"UPRO","symbol_name":"三倍做多标普500ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4702066-schb-broad-market-etf-investing-considerations","article_id":"2448169520","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1367122593/image_1367122593.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2448169520","pubTimestamp":1719935788,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Torsten Asmus Thesis With the S&P 500 up more than 14% YTD, 2024 is shaping to be another year of overperformance, led by technology mega-caps. Broad market exposure has brought investors more than de","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"UPRO":"三倍做多标普500ETF","LU0175139822.USD":"AB FCP I Global Equity Blend A USD","SPY":"标普500ETF","LU0097036916.USD":"贝莱德美国增长A2 USD","BK4577":"网络游戏","OEF":"标普100指数ETF-iShares","LU0320765059.SGD":"FTIF - Franklin US Opportunities A Acc SGD","BK4501":"段永平概念","IE00B3M56506.USD":"NEUBERGER BERMAN EMERGING MARKETS EQUITY \"A\" (USD) ACC","NVDA":"英伟达","MSFT":"微软","LU0289961442.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"AX\" (SGD) ACC","IE000KEQY171.SGD":"PIMCO BALANCED INCOME AND GROWTH \"M\" (SGDHDG) INC","BK4503":"景林资产持仓","IE0034235188.USD":"PINEBRIDGE GLOBAL FOCUS EQUITY \"A\" (USD) ACC","VOO":"Vanguard标普500ETF","BK4574":"无人驾驶","FDN":"First Trust Dow Jones Internet I","RSP":"平均加权指数ETF-Rydex S&P","BK4505":"高瓴资本持仓","IWV":"iShares Russell 3000 Index Fund",".SPX":"S&P 500 Index","SCHB":"Schwab US Broad Market ETF","LU0348723411.USD":"ALLIANZ GLOBAL HI-TECH GROWTH \"A\" (USD) INC","OEX":"标普100","VTI":"大盘指数ETF-Vanguard MSCI","IE0034235295.USD":"PINEBRIDGE GLOBAL DYNAMIC ASSET ALLOCATION \"A\" (USD) ACC","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","LU0353189763.USD":"ALLSPRING  US ALL CAP GROWTH FUND \"I\" (USD) ACC","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","VTI.AU":"Visioneering Tech","IE00BDCRKT87.USD":"PINEBRIDGE GLOBAL DYNAMIC ASSET ALLOCATION \"ADC\" (USD) INC","LU0056508442.USD":"贝莱德世界科技基金A2","BK4575":"芯片概念","SDS":"两倍做空标普500ETF","SSO":"两倍做多标普500ETF","BK4592":"伊斯兰概念","LU0308772762.SGD":"Blackrock Global Allocation A2 SGD-H","LU0061474960.USD":"天利环球焦点基金AU Acc","IE00BKDWB100.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5H\" (SGDHDG) ACC","BK4567":"ESG概念","BK4571":"数字音乐概念","AAPL":"苹果","BK4534":"瑞士信贷持仓","SPXU":"三倍做空标普500ETF","BK4533":"AQR资本管理(全球第二大对冲基金)","SH":"标普500反向ETF","IVV":"标普500指数ETF","SPY.AU":"SPDR® S&P 500® ETF Trust"},"translate_title":"SCHB：可靠，但估值昂贵","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"RSP":1,"IWV":1,"SCHB":1,"SPY":1,"SPY.AU":1,"VTI.AU":1,"VTI":1,"VOO":0.9,"FDN":0.9,"OEF":0.6,"SSO":0.6,"OEX":0.6,"SDS":0.6,"SH":0.6,"SPXU":0.6,"UPRO":0.6,"IVV":0.6,"ESmain":0.6,".SPX":0.6,"NVDA":0.3,"MSFT":0.3,"AAPL":0.3},"content_text":"Torsten Asmus Thesis With the S&P 500 up more than 14% YTD, 2024 is shaping to be another year of overperformance, led by technology mega-caps. Broad market exposure has brought investors more than desirable capital gains, yet it has also led to concentrated positions and extended valuations across mega caps. In this analysis, I will explore the characteristics and appeal of one of the most popular broad stock market funds, Schwab's U.S. Broad Market ETF (NYSEARCA:SCHB), while also examining key diversification and valuation considerations for this type of market exposure. SCHB Fund Characteristics Schwab's U.S. Broad Market ETF aims to provide investors with wide exposure to the stock market by tracking the total return of the Dow Jones U.S. Broad Stock Market Index. SCHB stands out for its impressive cost efficiency, charging only a 0.03% expense ratio and the width of exposure to over 2,400 U.S. companies. Incepted in 2009, SCHB has been a popular and proven choice among investors, while being one of the largest ETFs in the U.S. as well. Despite a large number of holdings, SCHB's total weighting exposure is somewhat geared towards large and especially mega-caps (over two-thirds of the fund's allocation represents companies that exceed $70B in market cap) as the fund reports a weighted average market capitalization of $783B. The fund's largest holdings include tech giants like Microsoft (MSFT), Apple (AAPL), and NVIDIA (NVDA), with the technology sector covering 28.11% of the SCHB's allocation, followed by Financials (13.74%) and HealthCare (12.25%) Broad-Market Funds' Limitations While at first a broad-market ETF like SCHB can be perceived as a well-diversified allocation for passive/conservative investors, in reality, it might not serve that purpose particularly well. Indexes like the S&P 500 or even the Russell 3000 are becoming increasingly concentrated around mega-caps, as they have been consistently outperforming and increasing their market cap weighting over the past decade. Today, the top 10 stocks cover approximately 37% of the total S&P 500 capitalization, with concentration levels reaching unprecedented historic highs. While earnings of the top 10 companies also account for a significant 27% share in the S&P 500, stretched valuations of mega-caps also amplify their dominance. The top 10 S&P 500 companies currently trade at a mean 30.3x P/E compared to a historic 25+ year average of 20.4x.   J.P. Morgan Asset Management Concentration in the stock market, in my view, translates into two major risk areas for ETF investors. The first has to do with broad-market ETFs creating a false perception of diversification, while also exposing investors to aggressive valuations and the threat of a sharp market pullback. Broad-market ETF investing shouldn't be avoided, however. Instead, a portfolio with majority holdings to an ETF like SCHB can be complemented with small-cap ETFs and targeted sector ETFs, especially in underrepresented sectors in today's stock market (utilities, industrials, etc.) A Rather Dim Valuation Outlook The past few years have been marked with strong stock market performance, especially in the mega-cap universe. As a result, valuation metrics, almost across the board, have overextended. The S&P 500 currently trades at a 21.0x P/E compared to its 30-year historic average of 16.7x. Dividend yields are also at historic lows as technology and other high-growth companies are overpowering broad market indexes. Despite some increasingly prevailing views that the new stock market era will by default include higher valuations, I believe, especially for investors with shorter time horizons, rerating risk is an important aspect to consider.   J.P. Morgan Asset Management As for SCHB, the ETF currently trades at a higher P/E compared to the S&P 500 (25.1x), yet with lower P/CF and P/B ratios (15.8x and 4.1x respectively). SCHB also offers a slightly lower 1.28% distribution yield compared to the S&P 500's 1.40%. Broad Market ETF Performance Comparison With ETF investing increasing in popularity for passive strategies looking to match market performance at low costs, broad-market ETFs provide numerous competing options for investors. In this segment, a focused risk/return performance analysis between a few of the most popular Funds available is provided. The analysis focuses on trailing 10-year metrics, examining, apart from SCHB, Vanguard's Total Stock Market ETF (VTI), SPDR's S&P 500 ETF (SPY), iShares' Russell 3000 ETF (IWV) and Invesco's S&P 500 Equal Weight ETF (RSP). As expected, all broad-market ETFs have recorded strong performance over the past decade, with RSP being the only ETF appearing to noticeably underperform due to its reduced mega-cap and technology stock exposure compared to its peers. SCHB comes second in terms of 10-year total return (+213%) and CAGR (12.12%) only to SPY, by a very small margin. It also offers the second higher Sharpe and Sortino ratio over the 10-year period, indicating desirable risk/adjusted performance. On the flip side, SCHB has recorded a slightly higher maximum drawdown and standard deviation compared to its peers.   Portfolio Visualizer While it is hard to recommend a single fund based on the backtest results previously analyzed, and especially considering that they all offer reliable options, offered by high-quality companies, SCHB seems like a very reasonable choice within the peer group. Final Thoughts  After all things are considered, SCHB offers investors a reliable option for obtaining passive, broad stock market exposure. Provided that alternative diversification options are also explored by the investors as well, a relatively expensive valuation is arguably the remaining sticky point for SCHB and almost every other broad-market index fund.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.28.3","shortVersion":"4.28.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2448169520"}