Why SCHD ETF Investors Should Consider BITO or Bitcoin

The Schwab US Dividend Equity (SCHD) ETF is one of the best-known Sleep Well at Night (SWAN) funds on Wall Street. It has over $48 billion in total assets and an expense ratio of just 0.06%.

Wall Street loves SCHD because of its high dividend yield and growth. The fund yields 3.67% and has historically outperformed other dividend-focused ETFs like SDY, HDV, VYM, and DGRO. They also love it for its strong dividend growth, which has been 13.70% in the past five years.

SCHD ETF is a value fund that owns companies with no meaningful growth. Some of its top holdings are companies like Broadcom, Verizon, Amgen, Coca-Cola, Merck, and Pepsico. A closer look shows that $10,000 invested in the fund in January 2020 would now be worth over $13,900.

SCHD investors are mostly contrarians who love it for its dividends and history of stability. As such, most of these investors have not invested in Bitcoin, which is known for its volatility.

The case for Bitcoin or BITO

BITO vs SCHD performance

There are two main ways for investing in Bitcoin presently: owning the real BTC or investing in the ProShares Bitcoin Strategy ETF (BITO). I prefer the former since it is an easy process and is less expensive since BITO has an expense ratio of 0.95%. That is a big ratio that will cost substantial sums in the long term.

There are a few reasons why SCHD ETF investors should consider Bitcoin. First, BTC has a long track record of success. It moved from less than $1 in 2009 to a peak of over $67,000 in 2021. It now sits at $37,000 while its market cap has surged to over $700 billion.

Therefore, while past performance is not a good indicator of the future, it makes sense to invest in assets that have done well before. Historically, Bitcoin has outperformed all asset classes, including stocks and commodities.

Second, Bitcoin has been tested in the past decade and mostly prevailed. It remained steady after the collapse of Mt.GOX in 2014. Recently, it survived the collapse of FTX, Celsius, Terra, Voyager Digital, and Celsius. All these events could have been fatal for the coin.

Most importantly, Bitcoin has survived the ongoing period of high interest rates, which have moved from 0% to 5.50%. In the past, the view was that Bitcoin and other cryptocurrencies would collapse as interest rates surged.

Third, Bitcoin is a finite resource. Satoshi Nakamoto ensured that only 21 million Bitcoins can be mined. 19.5 million coins have already been mined, leaving about 1.5 million coins yet to be mined. Over 4 million coins have been lost forever. And in 2024, Bitcoin will go through a halving event that will make it difficult to mine.

Therefore, there is a likelihood that Bitcoin will do well in the long term. Some analysts, including Cathie Wood and Mike Novogratz believe that it could surge to over $100k in the next few years.

Investing involves risks. SCHD ETF investors are not having a good year as it has lagged other popular funds like SPY and QQQ. Similarly, investing in Bitcoin and BITO has risks too. Therefore, I believe that the contrarian dividend-focused SCHD investors should also allocate some cash to Bitcoin or BITO.