Here's How Much You Have to Invest In These 3 Schwab ETFs to Generate $10,000 a Year In Passive Income

Among the top exchange traded fund (ETF) providers in the market, Schwab is a top ETF provider for investors of sizes and profiles. Those with a long-term investing time horizon have their pick of ETF providers to choose from, each offering excellent low-cost vehicles for portfolio diversification I think shouldn’t be ignored. 

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For those looking to generate $10,000 in passive income per year, the amount one will need to invest in each of the following ETFs is substantial. But via the power of compounding, over long periods of time, such a goal is certainly attainable for most households who are able to live well within their means and stay consistent with adding to these funds over time.

Let’s do the math and back out what a $10,000 passive income stream from each of these ETF offerings would entail in terms of total up-front investment (as of today).

Schwab U.S. Dividend Equity ETF (SCHD)

Schwab U.S. Dividend Equity ETF (SCHD) continues to be one of my top picks in the dividend ETF realm, for good reason. 

This ETF focuses on providing investors with access to the highest-quality dividend stocks in the market. Tracking the top 100 such stocks in the U.S. market, those seeking to remain overly exposed to domestic equities may opt for this ETF due to the relatively high yield this fund provides (around 3.9% at the time of writing) and the quality of the underlying holdings within this ETF. 

With an expense ratio right around 6 basis points (0.06%), there are few better low-cost options in the market for long-term passive investors looking to buy into this trend. And as I’ve pointed out in past pieces, SCHD remains one of my top holdings for this reason.

To generate $10,000 in passive income in perpetuity from this ETF, investors would need to put around $250,000 in capital to work in SCHD. Again, over a long period of time, that’s not an unreasonable sum for households who consistently save over many years. 

Schwab U.S. Large Cap Value ETF (SCHV)

When equity valuations surge to the levels they’re at today (with some analyses showing that stocks are more highly-priced today than they were during the dot-com bubble), having a value-first orientation with one’s portfolio construction is probably a good idea. 

One ETF which provides investors with this kind of value-first approach to dividend stock picking I thin is worth considering is the Schwab U.S. Large Cap Value ETF (SCHV). This ETF has a similar tilt as SCHD toward large and high-quality dividend paying stocks. However, this ETF also utilizes a value-oriented stock selection model, which attempts to parse out the best-quality underpriced stocks using key metrics such as price-earnings and book value to come up with these assessments. 

This means that investors who are seeking both capital appreciation and price stability from their dividend ETF get the best of both worlds. And with an even lower expense ratio of just 0.04%, investors get to benefit from this value-first model at an even lower cost.

Now, this fund’s focus on quality and size means that investors will give up some yield by investing in SCHV. With a current dividend yield of just above 2.1% (still better than the S&P 500 as a whole), investors would need around $465,000 in this ETF to generate $10,000 per year in passive income. 

Schwab International Dividend Equity ETF (SCHY)

Before investing in international stocks was fashionable (really for the better part of the past two decades, until recently), I’ve long touted the benefits of having some international exposure in one’s portfolio. For long-term investors looking at adding some diversified exposure to international dividend paying stocks, the Schwab International Dividend Equity ETF (SCHY) is my preferred vehicle for doing so. 

This ETF provides a similar dividend yield (3.9%) and expense ratio (0.06%) as SCHD, but focuses entirely on non-U.S. stocks. That means that an investor looking to allocate a percentage of their portfolio to international stocks while retaining a solid domestic base can elect whichever percentage of one’s portfolio they want to allocate to SCHY to get their desired international exposure, at no extra cost and with the same dividend yield. 

That’s my kind of investment, particularly right now when geopolitics and the overarching macro environment remain so uncertain. With so many great opportunities in global developed markets from Canada to Europe and Asia, this is a fund I think most investors should at least think about owning. That goes double for those investors who are overly-exposed to the U.S. market right now.