Should Schwab U.S. MidCap ETF (SCHM) Be on Your Investing Radar?
Launched on 01/13/2011, the Schwab U.S. MidCap ETF (SCHM) is a passively managed exchange traded fund designed to provide a broad exposure to the Mid Cap Blend segment of the US equity market.
The fund is sponsored by Charles Schwab. It has amassed assets over $8.76 billion, making it one of the larger ETFs attempting to match the Mid Cap Blend segment of the US equity market.
Why Mid Cap Blend
Mid cap companies, with market capitalization in the range of $2 billion and $10 billion, offer investors many things that small and large companies don't, including less risk and higher growth opportunities. Thus they have a nice balance of growth potential and stability.
Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.04%, making it the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.52%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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 16.80% of the portfolio. Financials and Information Technology round out the top three.
Looking at individual holdings, Devon Energy Corp (DVN) accounts for about 0.97% of total assets, followed by On Semiconductor Corp (ON) and Diamondback Energy Inc (FANG).
The top 10 holdings account for about 5.88% of total assets under management.
Performance and Risk
SCHM seeks to match the performance of the Dow Jones U.S. Mid-Cap Total Stock Market Index before fees and expenses. The Dow Jones U.S. Mid-Cap Total Stock Market Index is a float-adjusted market capitalization weighted index. The Index includes the mid-cap portion of the Dow Jones U.S. Total Stock Market Index actually available to investors in the marketplace and includes the components ranked 501-1000 by full market capitalization.
The ETF has lost about -17.17% so far this year and is down about -13.84% in the last one year (as of 05/10/2022). In the past 52-week period, it has traded between $66.60 and $83.39.
The ETF has a beta of 1.13 and standard deviation of 26.68% for the trailing three-year period, making it a medium risk choice in the space. With about 506 holdings, it effectively diversifies company-specific risk.
Alternatives
Schwab U.S. MidCap ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, SCHM is a sufficient option for those seeking exposure to the Style Box - Mid Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.
The Vanguard MidCap ETF (VO) and the iShares Core S&P MidCap ETF (IJH) track a similar index. While Vanguard MidCap ETF has $47.68 billion in assets, iShares Core S&P MidCap ETF has $58.70 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.
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.
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Schwab U.S. MidCap ETF (SCHM): ETF Research Reports
Devon Energy Corporation (DVN) : Free Stock Analysis Report
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
ON Semiconductor Corporation (ON) : Free Stock Analysis Report
iShares Core S&P MidCap ETF (IJH): ETF Research Reports
Vanguard MidCap ETF (VO): ETF Research Reports
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