The endless debate on Reddit investing forums seems to be the VOO vs SCHD or Growth vs Income/Dividends. I came across the YouTube video below which does a good job of discussing the pros and cons of each.
In the video, investing equal amounts in both VOO and SCHD over 30 years produces $5.6 million and $4.6 million, respectively. On the surface, it seems easy, VOO produces higher returns and thus more money but what no one ever seems to discuss is HOW YOU GET THAT MONEY OUT Of VOO!
SCHD is producing $18,000/month in presumably qualified dividends which are taxed at 15% (as of 2026 tax law). There is no need to sell any shares and the money just flows on a regular basis. Even in draw downs, the dividends will usually flow.
VOO is producing little dividend income so shares must be sold. The taxes will largely be driven by capital gain and the cost basis of the shares. Over a 30 year basis you may have over 200% growth and the capital gains tax will be the main driver of what you pay to get money out. Today the capital gains tax is capped at 20% but will it be the same in the future?
Of course, you can make the same argument for SCHD, will dividends be taxed at 15% or 20% in the future?
To me the core question to any investor is what is the level of risk appetite with VOO vs SCHD? Right now, it is an important question to ask because we’ve seen the market have a high level of volatility and VOO has had some big but short-lived draw downs. Tom Lee in a recent CNBC appearance expects a possible 20% correction in the market which if came to fruition could be devastating to the sequence of returns.
The answer to the risk appetite will also largely depend on your age. It’s fine to have VOO crash 20% or even 50% if you’re 20 or 30 years old and have 20 or 30 years to recover/retire but if you’re 50+ then you may not have that luxury to wait for a rebound.
I think the honest answer to the question is to simply have a blend of both in a diversified portfolio. And by diversified portfolio, I mean physical real estate (rental properties), bonds, stocks like VOO & SCHD and an array of other things that serve as hedges like gold, silver, foreign currencies, digital currencies, etc.
Ironically, we are entering an era where we have tens of millions of baby boomers retiring and planning on living off of their investments. What will 60 million boomers do to generate income? Will they sell their shares of VOO all at the same time? Will they all buy shares of SCHD for the income? It is with a bit of irony that SCHD is up 14% YTD vs 0.14% for VOO as of the time of this post.
Share The Wealth
Are you a VOO or SCHD investor? Both?