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Schwab U.S. Mid Cap ETF

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To pursue its goal, the fund generally invests in securities that are included in the Dow Jones U.S. Mid-Cap Total Stock Market 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. The Dow Jones U.S. Mid-Cap Total Stock Market Index includes the components ranked 501-1,000 by full market capitalization. The index is a float-adjusted market capitalization weighted index. As of August 31, 2023, the index was composed of 499 stocks.

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How Cheapskates Can Access Mid Caps

It&#39;s Cheap To Get Involved With Mid-Caps

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For investors that don&#39;t like stocks but do enjoy saving money on fund fees, exchange traded funds are highly desirable destinations. And for those looking to dance <a href="https://www.benzinga.com/trading-ideas/long-ideas/19/09/14418487/3-mid-cap-etfs-for-an-overlooked-asset-class">with mid-cap stocks</a>, a desirable asset class, there are plenty of compelling ETFs for cost-conscious investors to consider.
<h3>What Happened</h3>
The Schwab U.S. Mid-Cap ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/schm#NYSE">SCHM</a>) is very much in the cheap mid-cap ETF conversation. SCHM, which debuted more than eight years ago, charges a mere 0.04% per year, or $4 on a $10,000 investment. That easily makes it one of the cheapest mid-cap ETFs on the market and Schwab clients can realize added cost benefits by trading the fund commission-free on Schwab ETF OneSource.
SCHM tracks the Dow Jones U.S. Mid-Cap Total Stock Market Index <a href="https://www.schwab.com/public/schwab/investing/investment_help/investment_research/etf_research/etfs.html?path=/Prospect/Research/etfs/summary.asp?symbol=SCHM">and holds 505 stocks</a>, giving the fund a deeper roster than rivals tracking the S&amp;P MidCap 400 Index.
SCHM&#39;s s &ldquo;cost advantage has translated into strong category-relative performance over the long term,&rdquo; <a href="https://www.morningstar.com/articles/946123/this-etf-targets-an-overlooked-segment-of-the-market">said Morningstar in a recent note.</a> &ldquo;From its inception in January 2011 through July 2019, the fund has outperformed the category average by 270 basis points annualized while exhibiting slightly greater risk. On a risk-adjusted basis, the fund outperformed the mid-blend category average. Overall, this fund should continue to enjoy a durable long-term edge over many of its competitors thanks to its&nbsp; low expense ratio and lower-than-average cash drag.&rdquo;
<h3>Why It&#39;s Important</h3>
As is widely noted, investors typically gloss over mid-cap stocks in favor of larger or smaller names, but they do so at their own peril because, over long holding periods, mid caps usually outperform larger stocks and offer significantly less volatility than small caps.
&ldquo;Mid-cap stocks tend to have higher long-term growth potential than large-cap stocks. This is evidenced by the Dow Jones U.S. Total Stock Market Mid Cap Index&#39;s higher earnings growth compared with the Dow Jones U.S. Total Stock Market Large Cap Index over the trailing five years through July 2019,&rdquo; according to Morningstar. &ldquo;Furthermore, mid-cap stocks exhibit less volatility than small-cap stocks. Over the trailing five years through July 2019, the Dow Jones U.S. Total Stock Market Mid Cap Index&#39;s annualized standard deviation of returns was 13.6% versus 15.7% for the Dow Jones U.S. Total Stock Market Small Cap Index.&rdquo;
Despite those compelling traits, investors and asset allocators are usually woefully under-exposed to mid caps.
<h3>What&#39;s Next</h3>
SCHM has credibility as a late cycle play with nearly 53% of its combined weight allocated to technology, industrial and consumer discretionary stocks.
Morningstar has a &ldquo;Gold&rdquo; rating on the fund, the highest rating the research firm assigns to ETFs.
Related Links:
<a href="https://www.benzinga.com/trading-ideas/long-ideas/19/09/14448270/why-this-dividend-etf-can-work-in-a-variety-of-climates">A Dependable Dividend ETF</a>
<a href="https://www.benzinga.com/markets/cryptocurrency/19/09/14448184/vaneck-solidx-pull-bitcoin-etf-filing-from-sec-consideration">Disappointment For A Bitcoin ETF Plan</a>

As issuers of exchange-traded funds continue pushing the envelope when it comes to lower fees, an increasing array of market segments are getting cheaper for investors to access. No longer are low-fee equity funds solely reserved for the large-cap space.
Investors can tap smaller stocks, including mid-caps, via ETFs that are considered downright cheap. The Schwab U.S. Mid-Cap ETF (NYSE: <a class="ticker" href="/stock/schm#NYSE">SCHM</a>) is one of the low-cost leaders among mid-cap ETFs. SCHM&#39;s annual fee is just 0.05 percent, or $5 on a $10,000 investment. For the moment, and things like this are always subject to change in the ETF industry, SCHM is less expensive than competing funds from rivals<a href="http://www.schwab.com/public/schwab/investing/accounts_products/investment/etfs/schwab_etfs/market_cap_index_etfs"> iShares and Vanguard.</a>
SCHM, which turns 7 years old in January, follows the Dow Jones U.S. Mid-Cap Total Stock Market Index. The ETF is plain vanilla, cap-weighted fund, which helps keep its fee low.
<h3>Mid-Cap Diversification</h3>
SCHM holds 504 stocks, and the ETF&#39;s top 10 holdings combine for just 4 percent of the fund&#39;s weight with none of those holdings exceeding weights of 0.4 percent. That enhances diversification while minimizing single stock risk.
SCHM&#39;s &ldquo;top 10 holdings represent about 4 percent of assets, compared with the mid-blend Morningstar Category average of 24 percent,&rdquo; said Morningstar <a href="http://beta.morningstar.com/articles/830432/an-inexpensive-gold-rated-mid-cap-fund.html">in a note out Friday</a>. &ldquo;This fund&rsquo;s average market capitalization is about 15 percent smaller than the category average.&rdquo;
Some cap-weighted mid-cap ETFs have a tendency to drift into the lower end of the large-cap spectrum, meaning SCHM&#39;s lower average market value can provide investors with a purer avenue to mid-cap stocks. Mid-cap stocks have historically outperformed their large-cap peers while being less volatile than small caps.
<h3>A Solid Track Record</h3>

Although SCHM has not yet reached the much ballyhooed 10-year mark that many fund industry observers celebrate, its record to date is solid.
&ldquo;The fund outpaced the mid-cap blend category by 1.8 percentage points annually from its inception in January 2011 through September 2017,&rdquo; said Morningstar. &ldquo;The fund&rsquo;s risk-adjusted returns, as measured by its Sharpe ratio, also landed in the category&rsquo;s top quintile over the same period. Much of this relative outperformance can be attributed to the fund&#39;s sizable fee advantage and smaller-than-average cash drag.&rdquo;
Year to date, SCHM is up 13.6 percent, putting the ETF well ahead of the 10.9 percent returned by the S&amp;P MidCap 400 Index.
Related Links:
<a href="https://www.benzinga.com/trading-ideas/long-ideas/17/10/10203124/where-small-caps-are-dynamite">Where Small-Caps Are Surging</a>
<a href="https://www.benzinga.com/trading-ideas/long-ideas/17/10/10196990/robots-rule-this-etf">Robots Rule This ETF</a>

It's Cheap To Get Involved With Mid-Caps

Last week, BlackRock, Inc. (NYSE: <a class="ticker" href="/stock/blk#NYSE">BLK</a>) iShares unit, the world&#39;s largest sponsor of exchange-traded funds, shook the ETF industry with wide-ranging fee reductions to its iShares core lineup, a suite of ETFs designed four years with cost-conscious, long-term investors in mind.
All told, iShares <a href="http://www.benzinga.com/news/16/10/8530578/blackrock-flexes-its-muscles-in-fee-battle-cuts-core-etf-prices">lowered fees on 15</a> of its 22 core ETFs, including well-known offerings such as the iShares Core S&amp;P 500 Index (ETF) (NYSE: <a class="ticker" href="/stock/ivv#NYSE">IVV</a>), iShares S&amp;P SmallCap 600 Index (ETF) (NYSE: <a class="ticker" href="/stock/ijr#NYSE">IJR</a>), iShares Core High Dividend ETF (iShares Trust NYSE: <a class="ticker" href="/stock/hdv#NYSE">HDV</a>)) and the iShares Barclays Aggregate Bond Fund (NYSE: <a class="ticker" href="/stock/agg#NYSE">AGG</a>).
<h3>Mirroring Strategies</h3>
As is par for the course in the ETF business, fee cuts from one issuer are usually followed by some from a rival and usually that happens in short order. That is again the case as Charles Schwab Corp (NYSE: <a class="ticker" href="/stock/schw#NYSE">SCHW</a>) responded to the iShares fee cuts with its own fee reductions, announced last Friday.
<bzrelatedlink>Related Link: <a href="http://www.benzinga.com/analyst-ratings/analyst-color/16/10/8535976/inside-blackrocks-etf-fee-cuts">Inside BlackRock's ETF Fee Cuts</a></bzrelatedlink>
Schwab, the fifth-largest U.S. ETF issuer, said it lowered fees on five of its ETFs, which already among the industry&#39;s least expensive. The company lowered the annual expense ratios on the Schwab U S Small-Cap ETF (NYSE: <a class="ticker" href="/stock/scha#NYSE">SCHA</a>) and the Schwab Strategic Trust (NYSE: <a class="ticker" href="/stock/schm#NYSE">SCHM</a>) to 0.06 percent, or $6 per year on a $10,000 investment, from 0.07 percent.
The Schwab International Equity ETF (NYSE: <a class="ticker" href="/stock/schf#NYSE">SCHF</a>) is now charging 0.07 percent per year, down from 0.08 percent while the Schwab Emerging Markets Equity ETF (NYSE: <a class="ticker" href="/stock/sche#NYSE">SCHE</a>) saw its fee reduced to 0.13 percent annually down from 0.14 percent.
The Schwab Strategic Trust (NYSE: <a class="ticker" href="/stock/schz#NYSE">SCHZ</a>) undercuts the aforementioned AGG by a single basis point with a new annual fee of 0.04 percent.
Schwab clients can realize additional cost savings on the company&#39;s Schwab ETF OneSource platform, the largest commission-free platform in the brokerage business.
<a href="https://pro.benzinga.com/?utm_source=Benzinga&amp;utm_medium=Benzinga%20Top%20of%20Article&amp;am%22%3">Full ratings data available on Benzinga Pro.</a>
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U.S. stocks are once again flirting with record highs, and while large caps remain investors&#39; preferred destination, well-documented has been the out-performance offered by mid caps this year. There are scores of exchange-traded funds offering investors to this cap spectrum, plenty of which are also cost effective.
<h3>S&amp;P Capital IQ's Focus ETF</h3>
One of the cheapest is the Schwab Stragetic Trust(NYSE: <a class="ticker" href="/stock/schm#NYSE">SCHM</a>). In fact, SCHM charges just 0.07 percent per year, or $7 on a $10,000 investment. However, there are other reasons why SCHM was named S&amp;P Capital IQ&#39;s focus ETF for the month of September.
As <a href="http://www.benzinga.com/analyst-ratings/analyst-color/16/08/8380785/stick-with-passive-mid-small-cap-etfs-over-active-funds">has been recently noted</a>, active managers in the mid-cap arena have a hard time beating their benchmarks, which increases the allure of low-cost, passive mid-cap funds like SCHM.
<bzrelatedlink>Related Link: <a href="http://www.benzinga.com/trading-ideas/technicals/16/08/8407986/time-to-reassess">Time To Reassess</a></bzrelatedlink>
&ldquo;According to Investment Company Institute data, mid-cap mutual funds had $29 billion of outflows year to date through August 17, more than the $23 billion in outflows experienced by large-cap funds. Though we find this surprising given the popularity of passive S&amp;P 500 index based investments, recent data from S&amp;P Dow Jones Indices indicates that active mid cap funds face greater challenges,&rdquo; notes <a href="http://trymsatoday.com/">S&amp;P Capital IQ</a>. &ldquo;28 percent of the funds that were in the top quartile in the 12-month period ended March 2014 finished in the bottom quartile within the next two periods.&rdquo;
<h3>Pretty, But Not Perfect</h3>
However, SCHM is not perfect. Year-to-date, the ETF is up 10.2 percent, well behind the 13.4 percent returned by the S&amp;P MidCap 400 Index. SCHM tracks the Dow Jones U.S. Mid-Cap Total Stock Market Index.
The $2.5 billion SCHM allocates 27 percent of its weight to financial services stocks and a combined 29 percent to consumer discretionary and industrial names.
&ldquo;Further helping its S&amp;P Global Market Intelligence&#39;s ranking is our view that SCHM trades with bullish technical tendencies and is now higher than its 200-day moving average,&rdquo; added S&amp;P Capital IQ.
The research firm has an Overweight rating on SCHM.
<a href="https://pro.benzinga.com/?utm_source=Benzinga&amp;utm_medium=Benzinga%20Top%20of%20Article&amp;am%22%3">Full ratings data available on Benzinga Pro.</a>
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Mid-Cap Exposure On The Cheap

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Discount broker Charles Schwab (NYSE: <a class="ticker" href="/stock/schw#NYSE">SCHW</a>), sponsor to some of the least expensive ETFs on the market, is making some of those funds even cheaper. In a filing with the <a href="http://www.sec.gov/Archives/edgar/data/1454889/000119312512398527/d403516d497.htm">Securities and Exchange Commission</a>, Schwab outlined fee cuts a wide array of its ETFs.

Among the Schwab funds with lower expense ratios will be two of the firm's most popular products. The Schwab U.S. Broad Market ETF (NYSE: <a class="ticker" href="/stock/schb#NYSE">SCHB</a>) will see its fee reduced to 0.04 percent per year from 0.06 percent. The annual expense ratio on the Schwab U.S. Large-Cap ETF (NYSE: <a class="ticker" href="/stock/schx#NYSE">SCHX</a>) goes to 0.04 percent from 0.08 percent. SCHB has $1.1 billion in assets under management while <a href="https://www.schwabetfs.com/summary.asp?symbol=SCHX">SCHX had $887.5 million in AUM at the end of August</a>.

The Schwab U.S. Large-Cap Growth ETF (NYSE: <a class="ticker" href="/stock/schg#NYSE">SCHG</a>), Schwab U.S. Large-Cap Value ETF (NYSE: <a class="ticker" href="/stock/schv#NYSE">SCHV</a>). Schwab U.S. REIT ETF (NYSE: <a class="ticker" href="/stock/schh#NYSE">SCHH</a>) and the Schwab U.S. Mid-Cap ETF (NYSE: <a class="ticker" href="/stock/schm#NYSE">SCHM</a>) will see annual fees reduced to 0.07 percent from 0.13 percent.

The Schwab U.S. Small-Cap ETF (NYSE: <a class="ticker" href="/stock/scha#NYSE">SCHA</a>) goes down three basis points to 0.1 percent from 0.13 percent. In the dividend space, Schwab slashed the expense ratio on the Schwab U.S. Dividend Equity ETF (NYSE: <a class="ticker" href="/stock/schd#NYSE">SCHD</a>) to 0.07 percent from 0.17 percent.

Schwab also reduced expenses on several of its international funds, including the Schwab International Equity ETF (NYSE: <a class="ticker" href="/stock/schf#NYSE">SCHF</a>), which is going to 0.09 percent from 0.13 percent. The Schwab International Small-Cap Equity ETF (NYSE: <a class="ticker" href="/stock/schc#NYSE">SCHC</a>) will now have an expense ratio of 0.2 percent down from 0.35 percent.

Interestingly, the Vanguard MSCI Emerging Markets ETF (NYSE: <a class="ticker" href="/stock/vwo#NYSE">VWO</a>) has lost the title of cheapest emerging markets ETF. That honor now goes to the Schwab Emerging Markets Equity ETF (NYSE: <a class="ticker" href="/stock/sche#NYSE">SCHE</a>), which will now charge 0.15 percent compared with 0.25 percent in the past.

Fees on the Schwab U.S. TIPS ETF (NYSE: <a class="ticker" href="/stock/schp#NYSE">SCHP</a>) were cut in half to 0.07 percent from 0.14 percent. The Schwab Short-Term U.S. Treasury ETF (NYSE: <a class="ticker" href="/stock/scho#NYSE">SCHO</a>) goes to 0.08 percent from 0.12 percent while the Schwab Intermediate-Term U.S. Treasury ETF (NYSE: <a class="ticker" href="/stock/schr#NYSE">SCHR</a>) will now charge 0.1 percent compared with 0.12 percent in the past.

The Schwab U.S. Aggregate Bond ETF (NYSE: <a class="ticker" href="/stock/schz#NYSE">SCHZ</a>) also cut its fees in half to 0.05 percent from 0.1 percent while the Schwab U.S. REIT ETF (NYSE: <a class="ticker" href="/stock/schh#NYSE">SCHH</a>) will now charge 0.07 percent, down from 0.13 percent. 

All that on top of the fact that Schwab offers all of its ETFs on a commission-free basis to its clients.

For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

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Schwab U.S. Mid Cap ETF

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