The SCHD Snowball Calculator helps you visualize the potential growth of your investment in Schwab U.S. Dividend Equity ETF (SCHD) over time, focusing on the compounding power of reinvested dividends. This strategy is often referred to as the "dividend snowball" because your dividend income, when reinvested, helps generate even more dividend income, creating a cascading effect similar to a snowball rolling down a hill and gathering more snow.
How SCHD Works
SCHD is an exchange-traded fund (ETF) that aims to track the total return of the Dow Jones U.S. Select Dividend Index. This index selects high-dividend-yielding U.S. stocks based on fundamental strength and quality. SCHD is popular among income-focused investors because it:
Invests in companies with a history of consistent dividend payments.
Focuses on companies with strong financial health, such as healthy balance sheets and cash flows.
Reinvests dividends paid by the underlying companies.
The Math Behind the Snowball Effect
The calculator uses a simplified model to project your SCHD investment's growth:
Initial Investment: Starts with your initial lump sum.
Annual Contributions: Adds your regular contributions at the beginning of each year.
Dividend Calculation: At the end of each year, the ETF's current dividend yield is applied to the total investment value (including previous contributions and reinvested dividends).
Reinvestment: A portion (or all) of the calculated dividends is reinvested back into buying more SCHD shares. The calculator assumes you reinvest at least the specified percentage.
Compounding: The reinvested dividends increase your total holdings, which then generate more dividends in the subsequent year, thus creating the snowball effect.
The formula used in this calculator is an approximation. Actual returns can vary significantly due to market fluctuations, changes in SCHD's dividend yield, dividend policy changes, and commission fees for reinvestment (though often minimal or free for ETFs). This calculator assumes dividends are paid and reinvested once annually for simplicity.
Key Inputs Explained:
Initial SCHD Investment: The total amount you start with.
Annual SCHD Contributions: The amount you plan to add to your investment each year.
Current SCHD Dividend Yield (%): The current annual dividend payout as a percentage of the ETF's share price. This is a key driver of the snowball effect.
Dividend Reinvestment Rate (%): The percentage of your generated dividends that you intend to reinvest. 100% maximizes the snowball effect.
Number of Years to Project: The timeframe for the projection.
Why Use This Calculator?
This calculator is a valuable tool for:
Long-term investors: To understand the potential power of compounding and dividend reinvestment in their SCHD holdings.
Financial planning: To set realistic expectations for portfolio growth and income generation.
Understanding dividend investing: To see how reinvesting dividends can significantly boost overall returns compared to just taking the income.
Remember, past performance is not indicative of future results. Investing in ETFs involves risk, including the possible loss of principal.
function calculateSCHDSnowball() {
var initialInvestment = parseFloat(document.getElementById("initialInvestment").value);
var annualContributions = parseFloat(document.getElementById("annualContributions").value);
var schdDividendYield = parseFloat(document.getElementById("schdDividendYield").value) / 100; // Convert percentage to decimal
var dividendReinvestmentRate = parseFloat(document.getElementById("dividendReinvestment").value) / 100; // Convert percentage to decimal
var years = parseInt(document.getElementById("years").value);
var totalInvestment = initialInvestment;
var currentValue = initialInvestment;
var annualDividends = 0;
// Input validation
if (isNaN(initialInvestment) || initialInvestment < 0 ||
isNaN(annualContributions) || annualContributions < 0 ||
isNaN(schdDividendYield) || schdDividendYield < 0 ||
isNaN(dividendReinvestmentRate) || dividendReinvestmentRate 1 ||
isNaN(years) || years <= 0) {
document.getElementById("result").innerHTML = "
Error
Please enter valid positive numbers for all fields.";
return;
}
var previousYearValue = initialInvestment;
for (var i = 1; i <= years; i++) {
// Add annual contributions at the beginning of the year
currentValue += annualContributions;
// Calculate dividends for the year based on the value *before* adding this year's contributions for a more conservative estimate if preferred, or after.
// Let's calculate dividends on the value including contributions for a more aggressive growth projection
var dividendsGenerated = currentValue * schdDividendYield * dividendReinvestmentRate;
// Add reinvested dividends to the total value
currentValue += dividendsGenerated;
// Track total contributions made
totalInvestment = initialInvestment + (annualContributions * i);
// Store dividends from the last year for display
if (i === years) {
annualDividends = dividendsGenerated;
}
}
// Format results
var formattedTotalInvestment = "$" + totalInvestment.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
var formattedEstimatedValue = "$" + currentValue.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
var formattedProjectedDividends = "$" + annualDividends.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
document.getElementById("totalInvestment").textContent = formattedTotalInvestment;
document.getElementById("estimatedValue").textContent = formattedEstimatedValue;
document.getElementById("projectedDividends").textContent = formattedProjectedDividends;
document.getElementById("lastYear").textContent = years;
// Display the result section
document.getElementById("result").style.display = 'block';
}