HomeMost PopularETF Battles for Retirees: The Disappointing Faceoff Between SCHD and VYM

ETF Battles for Retirees: The Disappointing Faceoff Between SCHD and VYM

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Reflecting on SCHD’s Disappointing Performance

About half a year ago, the article β€œLose Money Slowly with SCHD” highlighted investor concerns about the performance of Schwab’s US Dividend Equity ETF (NYSEARCA:SCHD). As predicted, the ETF’s losses have continued, with a drop of over -4.45%, failing to keep up with inflation. This downward trend has persisted for a year, indicating a serious issue.

Contrary to this, iShares Treasury Floating Rate Bond ETF (TFLO) has shown steady returns, matching inflation, and outperforming SCHD. Moreover, TFLO’s consistent performance, driven by yield rather than price appreciation, highlights its potential as a safer alternative for investors.

Given these indicators, it becomes evident that SCHD’s poor performance is not a temporary setback but rather a persistent struggle. This underlines the need for a critical reassessment of the ETF’s value and potential for growth, especially for retirees banking on it for stability and income.

Unveiling the Troubles with VYM

Conversely, Vanguard’s High Dividend Yield ETF (NYSEARCA:VYM) offers little for retirees to cheer about. With a yield of only about 3.17%, it fails to outshine even non-yield focused portfolios. Its performance over the past years has been disappointing, unable to effectively counter inflation or deliver substantial returns.

The revenue growth of VYM’s top holdings over the past year consistently falls below inflation, indicating a significant gap in its ability to generate returns for investors. Coupled with substantial drawdowns and lackluster performance, VYM emerges as a perilous option for retirees seeking stability and income from their investments.

Looking Beyond SCHD and VYM

Amidst the underwhelming performance of these popular ETFs, it becomes crucial for retirees and investors to explore alternative investment strategies. Instead of dwelling on dividend stocks, the focus should shift to non-dividend-paying stocks and other avenues offering safe and reasonable yields, such as CDs, high-yield money markets, and short-duration treasuries.

Expanding the investment universe to encompass a broader range of stocks opens up opportunities for growth and stability, ensuring retirees aren’t tethered to overvalued dividend stocks that fail to deliver meaningful returns.

By selecting a diversified range of high-quality non-dividend-paying stocks, combined with stable and yielding investment options, retirees can ensure growth, income, and security in their investment portfolio.

Final Thoughts

Reflecting on the disappointing performance of SCHD and VYM, it becomes evident that a singular focus on dividend stocks might not be the most prudent strategy for retirees. To navigate the challenging investment landscape, it is essential for investors to adapt, learn, and diversify their portfolios beyond traditional dividend-focused ETFs. By embracing a multifaceted approach to investments, the potential for sustained growth and stability can be realized, offering retirees a renewed sense of financial security and prosperity.

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