SCHD holds a significant percentage of my portfolio. I’m a retiree and I like the fact that SCHD is steady and boring. I like steady and boring a lot. I’ve been thinking about opening a position of DON, also nicely steady and boring, to add some diversification through mid-caps, but the finances are throwing me off. I look at SCHD with a much lower expense ratio and a higher yield, and I see DON, between expense ratio and yield, with a significant drag and looking out into the future that drag would add up. As a mid-cap, DON also carries a slight risk in terms of volatility which makes me think that should I have to sell for any reason, with a more volatile mid-cap, the odds are higher than I could be selling at a lower value than I’d like. Probably low odds with that possibility, but still a small factor. Finally, DON is a little less tax efficient than SCHD.
My original thought was a 7-10% position in DON and now I'm trying to figure out what DON, or mid-caps in general, really brings to my portfolio that I’m not seeing. What makes the drag over 20 years worth it, and why is mid-cap diversification, held long term, necessary or important for a retiree who's only willing to commit to a smaller allocation? Why isn't just splitting the money I set aside for DON into SCHD and VOO a more sensible move?