Passive vs Active ETFs
Why I'm anchoring my portfolio with one of each
Total Portfolio: $56,539
Day 172 | $21,869 (Fidelity)
Day 537 | $34,670 (Ally)
Let me tell you about my two portfolio anchors – not stocks, not crypto, but two humble Exchange Traded Funds (ETFs) that have become the bedrock of my financial independence plan.
One’s a steady, rules-based workhorse that chugs along like a dividend-paying locomotive. The other’s a nimble, expert-driven opportunist that hunts for value like a Wall Street bloodhound.
Let me show you why this combo has become the backbone of my portfolio – and why you might want to steal the blueprint.
Understanding Passive vs Active ETFs
Passive ETFs track established indexes with minimal management intervention, typically offering lower fees and consistent market returns. I love passive funds because they simply follow a strategy and no one can mess it up!
Active ETFs, on the other hand, are managed by investment professionals who make strategic decisions to potentially outperform the market. With active funds, I'm essentially letting the experts (aka smarter people than me!) do their thing.
Warren Gibbon from Boston Family Advisors wisely notes that investors shouldn't think about investments as "active or passive, but active and passive."
My Passive Anchor: SCHD (Schwab US Dividend Equity ETF)
SCHD has become a favorite among dividend investors for good reason. This passive ETF tracks the Dow Jones U.S. Dividend 100 Index, focusing on high-quality dividend-paying companies. I currently hold 116 shares of SCHD, which forms a solid foundation in my portfolio.
Performance Highlights:
Current dividend yield: 3.53%
Impressive dividend growth: 12.21% (1-year)
Quarterly dividend payments
The fund has delivered strong long-term dividend growth with a 10-year Dividend CAGR (Compound Annual Growth Rate) of 11.18%. Which is quite impressive!
My Active Anchor: CGDV (Capital Group Dividend Value ETF)
CGDV is a newer active ETF launched in 2022 that focuses on dividend-paying stocks of established U.S. companies. I've accumulated 111 shares of CGDV, balancing out my passive holdings with this actively managed fund.
Performance Highlights:
Current dividend yield: 2.02%
Strong 1-year return: 23.4%
Quarterly dividend payments
Dividend History:
Despite being newer to the market, CGDV has shown promising dividend growth:
2024 total payout: $0.5637 (14.29% growth from previous year)
2023 total payout: $0.4932 (54.17% growth from 2022)
2022 total payout: $0.3199
Comparing Top Holdings
The composition of these ETFs reveals their different approaches:
SCHD Top Holdings (as of September 2024):
Home Depot (HD): 4.33%
Verizon Communications (VZ): 4.27%
Cisco Systems (CSCO): 4.21%
BlackRock (BLK): 4.20%
Pfizer (PFE): 4.05%
CGDV Top Holdings (as of February 2025):
Meta Platforms (META): 6.13%
Microsoft (MSFT): 4.62%
RTX Corporation (RTX): 4.48%
Philip Morris (PM): 4.15%
American International Group (AIG): 3.83%
The difference is striking - SCHD focuses on traditional dividend stalwarts, while CGDV includes growth-oriented companies like Meta and Microsoft alongside strong dividend payers.
Why This Pairing Could Transform Your Investment Approach
This SCHD/CGDV combination addresses core investor needs through strategic balance. Let's examine how these ETFs may fit into your portfolio:
1. Predictable Foundation
SCHD's rules-based methodology (3.53% yield, 11.18% 10-year dividend CAGR) provides essential stability. Its mechanical rebalancing eliminates emotional decisions - particularly valuable during market turbulence.
2. Growth Potential
CGDV's active management capitalizes on opportunities passive strategies might miss, evidenced by its 23.4% 1-year return. Professional stock selection gives exposure to evolving sectors while maintaining dividend discipline.
3. Compounding Advantage
SCHD's consistent dividend growth builds wealth through reinvestment, while CGDV's tech holdings (6.13% Meta allocation) offer appreciation potential. Together they create dual compounding engines.
4. Strategic Flexibility
Conservative investors might weight SCHD heavier, while growth-seekers could increase CGDV exposure.
This isn't about choosing between philosophies, but harnessing their combined strengths. SCHD's automation protects against human error, while CGDV's active management leverages human expertise. The result? A portfolio that's:
Resilient in downturns (SCHD's defensive sectors)
Opportunistic in recoveries (CGDV's growth tilt)
Continuously income-generating (both funds' dividends and dividend growth)
For investors seeking to mitigate volatility without sacrificing growth potential, this dual-anchor approach could offer compelling advantages.
Of course, I don’t know your exact goals, but wanted to take a minute to share two of my favorite dividend funds, and why they are such a big part of my walk to wealth.
Until next time, keep walking!
Jeremy ✌️
And before you leave…
Disclaimer
This article is for informational and educational purposes only. I am not a financial advisor, broker, or tax professional. The information provided reflects my personal opinions and experiences as an individual investor and may not be accurate or current. All investment strategies and investments involve risk of loss. Any ideas presented may not be suitable for all investors and may not take into account your specific investment objectives, financial situation, or needs. Past performance is not indicative of future results. Always conduct your own due diligence and consult with qualified financial professionals before making any investment decisions.