Blackrock’s iShares Bitcoin ETF (IBIT) and the Schwab US Dividend Equity ETF (SCHD) are the premium funds in their categories. IBIT leads among spot Bitcoin ETFs with almost $60 billion in assets, while SCHD is one of the top dividend funds in the market.
So, which is a better fund to buy for investors seeking to Sleep Well At Night?
IBIT ETF Is a Popular Bitcoin Fund
The IBIT ETF is a fund that gives investors, especially those in the United States, easy access to Bitcoin. It charges an annual fee of 0.25%, making it a highly affordable fund to buy and hold.
Investing in IBIT is a bet that the price of Bitcoin will continue to rise over time, as it has always done in the last few years. Since Bitcoin has many catalysts, investing in IBIT is easy. First, there are odds that the US and other governments will start adding BTC to their Strategic Bitcoin Reserves soon.
The head of the Czech Central Bank has told the Financial Times that he will spend billions to buy Bitcoin if allowed. He also expects other central banks to do the same.
Senator Cynthia Lummis, a Republican, is in charge of creating an SBR in the US. She hopes the government will buy 200k coins for five years and use the purchases to pay down debt.
The other notable case for Bitcoin is that it has a long history of outperformance. It is the only asset whose price has jumped from near zero to over $108,000 in 16 years. For example, the S&P 500 index started trading below $50 in the 1950s and currently stands at $6,039.
Bitcoin is also an all-weather asset that does well regardless of who is in the White House. It has historically hit a record high under all presidents. That is a sign that the momentum will continue over time.
Most importantly, Bitcoin’s supply and demand metrics are bullish. Its supply remains under pressure as the mining difficulty and hash rate fall. Bitcoin balances on exchanges have continued falling. Therefore, if history repeats itself, there is a likelihood that the IBIT ETF will do well.
Is SCHD a Good Dividend ETF?
The SCHD ETF differs from the IBIT fund because it is aimed at income investors seeking regular dividend payouts. It achieves that by investing in a company with a record of paying and boosting its dividends.
SCHD is a cheaper fund than IBIT, with an expense ratio of 0.06%. It owns many large and well-known companies across sectors like healthcare, finance, consumer staples, and industrials. Some of the top names in the fund are Pfizer, Blackrock, Amgen, Coca-Cola, and Cisco.
While SCHD is a good and popular fund, two key concerns exist. First, as a dividend fund, its yield of 3.65% is not big enough in a world where a 6-month T-bill yields 4.3%. Second, its performance is correlated with that of the S&P 500 index. The two funds have an average annual return of about 11%.
A $10,000 invested in the SCHD ETF in 2011 would be about $30,000, while a similar amount in the SPDR S&P 500 would be worth $35,000. However, a similar amount invested in BTC in 2011 would be worth $3.4 billion.
SCHD vs IBIT: Better buy?
In conclusion, the IBIT ETF is a better SWAN ETF than SCHD because of its sound performance record. It is also not highly correlated with the broader market.
Most importantly, IBIT ETF has a better chance of performing well over time because of its strong fundamentals, such as demand and supply.
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