The Schwab US Dividend Equity (SCHD) and the iShares Bitcoin Fund (IBIT) are market-leading Exchange-Traded Funds (ETFs) in their respective sectors. SCHD, with over $53 billion in assets, dominates the dividend ETF sector while IBIT is a major player in the crypto industry. This article will explore which is the better investment between SCHD and IBIT.
SCHD vs IBIT ETFs
To be clear: this is like an apples-and-oranges comparison because of how different the two are. SCHD is designed to track companies with a good track record of paying dividends like Broadcom, Amgen, Chevron, and Coca-Cola. Most of these are slow-growing companies that have been in the industry for decades.
IBIT, on the other hand, is designed to track the price of Bitcoin, an asset that has been around for the past 15 years. Unlike SCHD, which has over 100 assets, IBIT focuses on Bitcoin only. It has accumulated over $11 billion worth of assets in the past two months.
SCHD is often seen as the gold standard when it comes to dividend investing. It has a spectacular dividend yield of over 4% while its dividend growth in the past ten years has been over 10%. To some extent, it has even outperformed the S&P 500 index, which is mostly made up of big technology names like Apple, Microsoft, and Nvidia.
There are three main reasons why IBIT seems like it is a better investment than SCHD. First, its performance has been better. It has jumped by more than 32% this year while the SCHD has soared by less than 2%.
Since IBIT was started in January, we can replace it with Bitcoin. In this case, Bitcoin is the only asset whose price has moved from less than $1 in 2009 to over $60,000 today. This means that someone who bought just 1 BTC in that period now has over $60k. Someone who invested $1 in SCHD when it was created now has $4.49.
Bitcoin is a real asset
Second, Bitcoin has proven that it is a real asset. Over the years, it has had to fight against pushback by experts like Warren Buffett and Charlie Munger. It was banned in China and most regulators have been unfriendly.
Most importantly, it has had to contend with the major failures in the crypto sector like FTX, Mt. Gox, Terra, and Voyager Digital. All these were black swan events that many people believed would lead to the death of the coin.
Third, Bitcoin is extremely rare, which makes it valuable. It has a supply limit of 21 million and 19.5 million coins have already been mined. Millions of them have been lost completely while the upcoming halving event will slow the supply.
Now, with institutional demand rising, and with supply in exchanges falling, it means that the price may continue rising in the foreseeable future.
Therefore, I believe that IBIT is a better investment than SCHD. However, SCHD has also proven itself in the dividend areas. As such, since owning one ETF is often risky, as I wrote earlier, analysts recommend buying a few of them.
In this case, investing in SCHD and IBIT is beneficial because the latter will provide growth while SCHD will provide regular dividends.
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