Charles Schwab’s senior portfolio strategist Eliot Bishop told NYSE’s Judy Shaw that income was a “big focus” for clients.
“Fixed income is back in the back in the conversation,” Bishop said at Exchange 2023. “The joke in the industry was, ‘There wasn’t a whole lot of income to get with fixed income.’ So now we’re at a point where fixed income is going to be a part of these conversations this year.”
So, Schwab has a couple of ETFs that Bishop thinks clients should consider for their income needs.
Diversifying Client Portfolios With Dividend and Muni Funds
In 2011, Schwab looked at the dividend equity space and saw there were two types of dividend products available. There were products primarily focused on dividend growth but had no built-in yield screen. Or there were products focused on the highest yielding stocks but had no quality screen.
So, Schwab launched the Schwab US Dividend Equity ETF (SCHD). According to Bishop, SCHD “brings the best attributes of dividend growth investing with high yield. He added the fund has a “quality tilt to it.”
“That product has been a really big hit for us,” he added.
The asset manager saw the success of SCHD and thought, “Wait a second. What if we take that success and put it into the international ex-U.S. space?” So, Schwab launched the Schwab International Dividend Equity ETF (SCHY). And Bishop said he thinks international dividends would “be a nice way for clients to diversify their portfolios” in 2023.
Finally, Schwab years ago looked at the municipal bond space and wondered when the right time would be to launch a muni ETF. “Back then we were looking for the right entry point,” Bishop said.
Last year, rising interest rates gave Schwab “a great entry point to launch” the Schwab Municipal Bond ETF (SCMB). The firm’s muni bond ETF carries an expense ratio of just three basis points, “which is an outstandingly low management fee.”
While Bishop said those three ETFs are “going to be some of the top-of-mind tickers,” Schwab has nearly 30 ETFs “that clients can look into.”
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