Interesting explanation of Chiefio’s investment strategy:
Funds ex-Blackrock: Use Schwab!
Posted on 1 August 2024 by E.M.Smith
Intro
Blackrock, Vanguard, State Street – all of them vote shares hard left / ESG / DIE etc. and push companies and their executives into Budweiser Moments or Disney Decay. One wonders why, when it would cost the company and the shareholders a lot of money.
Well, perhaps it is because a huge part of their “Holdings” are in various funds that are owned by someone else, but where the voting rights end up in their pocket. So they don’t really care if the stock goes up or down.
Take, for example, the ticker SPY. That is an S&P 500 fund that holds 500 stocks. Yet I don’t get 500 voting sheets when I own SPY…
SPY is a product of State Street who have the SPDR set of funds. Similar sets of funds are run by Vanguard, Blackrock (iShares), etc.
But what if you want to own the S&P 500 in an Exchange Traded Fund, but don’t want State Street, Vanguard, Blackrock to vote those shares? Well, Schwab has a large set of funds as well. Furthermore, I have no idea what the political orientation of Schwab might be. I think that is a feature. Near as I can tell, they are politically neutral. In 2021 they shut down their political contribution PAC.
https://www.nytimes.com/2021/01/13/business/charles-schwab-pac.htmlBy Lauren Hirsch
Jan. 13, 2021
Charles Schwab will shut down its political action committee, perhaps the most significant move among companies rethinking their political donations after last week’s violence in the Capitol.
Schwab, one of the country’s biggest brokerage firms, with around 30 million customer accounts holding more than $6 trillion in assets, said it found the current “hyperpartisan” environment too complex to navigate without risk of distraction.
“We believe a clear and apolitical position is in the best interest of our clients, employees, stockholders and the communities in which we operate,” the company said on Wednesday.
The company’s PAC will no longer take contributions from employees or make financial contributions to lawmakers. It will donate the leftover funds to Boys & Girls Clubs of America and to historically Black colleges and universities, organizations that Schwab has supported in the past. Schwab’s PAC had around $114,000 in cash near the end of November, according to the Center for Responsive Politics.
[…]
In the latest election cycle, Schwab’s PAC gave $460,000 to federal candidates, roughly evenly split between Republicans and Democrats. Among the recipients was the House minority leader, Representative Kevin McCarthy of California, one of the Republicans who voted against certifying President-elect Joseph R. Biden Jr.’s victory.
The Lincoln Project, a group of anti-Trump conservatives, had featured Schwab in a recent campaign highlighting companies that donated to President Trump or the election objectors in Congress.
So if The Left is / was attacking Schwab, then I think I can trust them with my voting rights.
Here is a small selection of Schwab funds that are alternatives to the SPDRS and iShares (Blackrock) dominant tickers. I’ll often still chart the SPDRs or iShares since trade volume in them from professional traders is higher (and volume does tell me things), but I’ll use the Schwab fund for my actual trades and investements “going forward”.
Realize that Schwab has both ETFs that trade real time during the day like a stock ticker, and Mutual Funds that trade only at the end of the day (IIRC it is 5 pm ET when mutual funds are priced and trades complete). So choose accordingly. Also, for Schwab funds, some of them have no commission for trades done in a Schwab account. I’m not sure which all of them have no commission, but at least the Schwab Mutual Fund for S&P 500 had none.
How did I select these tickets? I charted a lot of their tickets and didn’t bother with any that had a history of low returns or were almost identical to another one that had a simpler selection criteria.
Common Schwab Class
Ticker Ticker
DIA FNDB Dow 30 Industrials more or less
QQQ / KLX SCHG Large Cap Growth ~match Nasdaq 100 at this time
SPY SWPPX Mutual Fund S&P 500.
ETFs: SCHB & SCHK SCHX slighly less.
MDY SCHM Mid Capitalization US Stocks
IWM SCHA Small Caps. Approx Russel 2000 match
Ditto SCHV w/Dividends a bit higher.
Some Others That I didn’t like at this time, but might be interesting some day. Mostly due to my style of investing and trading, not so much the actual fund performance (though some were lesser lights):
SCHY Intl. Dividend Equity
(long term flatish, 6.4% yield now)
SCHH REIT Real Estate Fund. Down ~10% over 2 years.
STCE Crypto fund. Very volatile & rising.
FNDA "Fundamental" US Small Cap Index
A little better than IWM. But <MDY long term.
International:
SCHC Intl small capitalization
SCHF Intl Equity
EEM SCHE Emerging Markets
SCHY Intl Dividend Equities
Bonds:
SCYB High Yield
SCMB Muni Bonds
SCHJ 1-5 yr. Corporate
SCHI 5-19 year Corporate
SCHZ US Aggregate bonds
TIP SCHP US TIPs - Treasury Inflation Protected bonds
If there is no “usual ticker” that’s because I don’t normally hold / trade in that category or I didn’t find a good match. Schwab has a lot more funds, and then there’s at least 4 major fund companies with various tickers that trade for various indexes and categories. Doing a full “all vs Schwab” would take a while and make for a huge posting.
For example TLT is long duration US Treasuries. But I don’t have those (or a Schwab alternative) since with inflation what it is, long term treasuries are not your friend. Plus, while a BOND can take a price cut and you can just choose to hold it to expiration and recover that, a BOND FUND has no expiration and if a bunch of folks panic out on a price drop, the fund sells those bonds and locks in the loss. So I avoid bond FUNDS…
My Basic Investment is S&P 500 index funds. Why? Because it is extremely hard to beat the S&P 500. I’ve done it from time to time, but it takes daily attention and a lot of trading (which means commissions and taxes too). How does it do that? There are 3 properties that make it automatically managed for gains.
1) It is the 500 largest American companies (many of which have international operations so you get foreign exposure as well). So you are kept out of the Small Flaky Companies. All those Penny Stocks and Fly By Night Mining Companies and such. By definition, these are the big successful franchises with pricing power and Economies Of Scale in purchasing and operations.
2) Any company that is a young up and comer growing company will eventually enter at the bottom edge, and you get the growth as it moves up the stack. Any company that is shrinking and struggling, eventually leaves at the bottom of the 500 and does so long before bankruptcy and zero value. You automatically “buy in” to winners and “sell out” of losers.
3) It is Capitalization Weighted. Companies that grow, get more shares in the index and more percentage of your “holdings”. Companies that are shrinking get the holdings reduced in proportion (until they leave).
With all that automatic management by a large group of professional financial folks, it is hard to beat.
Over the long haul, the Nasdaq 100 has beaten the S&P 500. This is because the Tech area has grown faster and created whole new markets. Faster invention and innovation (and so, profits). So very long term, the Nasdaq has been the winner. BUT, it is a little more volatile and in down markets, it crashes harder. One of my indicators of a down market is when the QQQ falls under the SPY on the charts.
So a case can be made for holding Nasdaq during good times, and swapping to SPY (or others) during downdrafts. So, in fact, most of the time I hold about 1/2 and 1/2 of S&P 500 and Nasdaq 100, plus some things where I trade or play with them.
One other thing:
For metals, there are also alternatives to the GLD (SPDR) and SLV (iShares). They are from Sprott and Aberdeen . PHYS for “physical gold” and SIVR for silver. SGOL is there Aberdeen gold fund.
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I don’t know Sprott or Aberdeen political orientation, but I do know I don’t like SPDR and iShares voting my shares.
The Chart
Here is a 5 year weekly tick size chart for several index funds. The main ticker is SWLGX a Schwab Mutual Fund in large Cap Growth. It acts roughly like an average of the S&P 500 and the Nasdaq 100 (SPY / QQQ). DIA is the Dow 30 Industrials, MDY is the Mid cap Index, IWM is the Russel 2000 index fund, and RSP is the “equal weight S&P 500” (or one share of each of the 500 regardless of market capitalization).
S&P 500, Nasdaq 100, and other index 5 year comparison.
S&P 500, Nasdaq 100, and other index 5 year comparison.
Someday the tech invention / innovation cycle will slow and the relative growth prospects will shift. But tech has been winning for a long time…
Also note how “blue on top” for the DMI / ADX indicator clearly describes rising markets, while “Red on Top” is a good flag for those years to be out. MACD is a little more ambiguous, but not much. Above zero rising or sideways – in. Hard down or below zero – out. Makes it pretty easy to know long term market directions. The hard bit is at the inflection points between “in” and “out”. But frankly, even if you are a month late on making the change, it is a LOT better than riding a down market for a year, or being 2 years late getting back in.
Links To More
To look over more offerings, should you prefer some other categories:
Mutual Funds (including links to how they voted shares):
https://www.schwab.com/mutual-funds/find-mutual-funds/investor-informationETFs (there’s a lot of them in many categories):
https://www.schwab.com/etfs/invest-in-etfshttps://chiefio.wordpress.com/2024/08/01/funds-ex-blackrock-use-schwab/
