A sound investment process and strong management team underpin Schwab 1000 ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's investment process inspires confidence and earns a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Microsoft

Apple

NVIDIA

Amazon

Alphabet

Berkshire Hathaway Inc. - Ordinary Shares - Class B

Eli Lilly

Broadcom

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Schwab 1000 ETF earns a High Process Pillar rating. The largest contributor to the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Respectable risk-adjusted performance also supports the process. This can be seen in the fund's 10-year alpha calculated relative to the category average, which suggests that the process was successful over that period. 

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track as closely as possible, before fees and expenses, the total return of the Schwab 1000 Index®.  The Schwab 1000 Index is a float-adjusted market capitalization weighted index that includes the 1, 000 largest stocks of publicly traded companies in the United States, with size being determined by market capitalization (total market value of all shares outstanding). It is the fund's policy that under normal circumstances it will invest at least 90% of its net assets (including, for this purpose, and any borrowings for investment purposes) in stocks included in the index. 

 The portfolio has allocations in its top two sectors, technology and consumer cyclical, that are similar to the category. The sectors with low exposure compared to category peers are industrials and healthcare; however, the allocations are similar to the category. The portfolio is composed of 996 holdings and is less top-heavy than peers. Specifically, 29.0% of the strategy's assets are concentrated within the top 10 fund holdings, as opposed to the typical peer's 48.8%. And finally, in terms of portfolio turnover, on a year-over-year basis, 4% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

High

Process

Charles Schwab’s team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are four managers listed on the fund: Christopher Bliss, Agnes Zau, Ferian Juwono, Jeremy Brown. Together, they manage a total of 22 strategies, with a Gold asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Above Average

People

Under new but familiar leadership, Schwab Asset Management Solutions maintains its Above Average Parent Pillar rating. 

After the former Schwab CEO was named president of parent Charles Schwab Corporation in 2022, Omar Aguilar, a Schwab CIO since 2011, was promoted to CEO while retaining his CIO role. Under Aguilar's leadership, Schwab remains focused on core-oriented strategies: More than 95% of the firm's fund assets under management are in low-cost index products that are suitable for the biggest portions of investors' portfolios. Index-tracking remains are par with the best teams in the business.

Recent strategic initiatives show a desire to grow in an increasingly competitive landscape. Forays into direct indexing—which customizes separate accounts through tax-loss harvesting, values-based requests, or other client preferences—as well as some new launches, such as Schwab Municipal Bond ETF, fit the firm's strategic focus and are natural extensions of its capabilities. However, other recent launches in more-niche asset classes, including Schwab Crypto Thematic ETF, contrast previous refusals to enter trendy markets. 

Schwab benefits from its association with its parent's brokerage business. This arrangement and efficient operation allow funds to grow quickly and keep fees in line with larger competitors. Historically, Schwab has been quick to match competitor fee cuts and now sports a 0.09% asset-weighted average fee across its mutual funds and ETFs.

Parent

Schwab 1000 Index ETF

SCHK tracks a proprietary market-cap-weighted index that includes 1,000 of the largest US-listed stocks.

Designed to provide broad exposure to the Large Cap Blend segment of the US equity market, the Schwab 1000 Index ETF (SCHK) is a passively managed exchange traded fund launched on 10/11/2017.

Should Schwab 1000 Index ETF (SCHK) Be on Your Investing Radar?

Schwab 1000 Index ETF (SCHK) covers over 90% of the total US stock market capitalization, but the market is considered expensive based on the revised Buffett Indicator and forward P/E ratio. SCHK had a challenging year in 2022 but has since recovered, delivering a positive return of 19.2%. The Federal Reserve's elevated interest rates and the possibility of a recession pose significant downside risks to SCHK's fund price, so investors should wait on the sidelines.

SCHK: Valuation Unreasonably High

SCHK is an ultra-low-cost investment vehicle with an equity blend encompassing 1000 U.S. heavyweights possessing both value and growth characteristics. SCHK tracks the in-house developed proprietary benchmark, the float-adjusted market-cap-weighted Schwab 1000 Index. Its methodology is rather similar to the one used by FTSE Russell for its famous Russell 1000 index.

News for Schwab 1000 Index ETF ETF (SCHK)