SCHG vs VUG: Understanding the Key Differences
LAST UPDATED: April 13, 2023 | By Conrad Golly
As an investor, I’m always on the lookout for the best investment opportunities. One of the most popular investment options is exchange-traded funds (ETFs).
In particular, I’ve been interested in comparing the Vanguard Growth ETF (VUG) and the Schwab U.S. Large-Cap Growth ETF (SCHG).
SCHG vs VUG: Both VUG and SCHG are large-cap growth ETFs that aim to provide investors with exposure to some of the largest and fastest-growing companies in the U.S. market.
However, there are some key differences between the two ETFs that investors should be aware of before making an investment decision.
Table of Contents
What is SCHG?
If you’re looking for a Large Growth fund that is issued by Schwab ETFs, then the Schwab U.S. Large-Cap Growth ETF (SCHG) might be the right choice for you.
As of the current date, the fund has 15.16B total assets under management and has yielded an average annual return of 17.81% over the past 10 years.
The fund has a dividend yield of 0.43% with an expense ratio of 0.04%.
How does SCHG work?
SCHG is a passively managed fund that tracks the performance of the Dow Jones U.S. Large-Cap Growth Total Stock Market Index.
It invests in large-cap U.S. growth stocks that have higher-than-average earnings growth rates and higher price-to-book ratios compared to the broader market.
SCHG’s strategy is to provide investors with long-term capital appreciation by investing in companies that have strong growth potential.
What are the benefits of investing in SCHG?
One of the main benefits of investing in SCHG is that it provides investors with exposure to large-cap U.S. growth stocks.
These stocks have historically outperformed the broader market, and SCHG’s strategy is designed to capture this outperformance.
SCHG has a low expense ratio of 0.04%, which means that investors can keep more of their returns.
Finally, SCHG is offered by Schwab ETFs, which is a reputable and well-established provider of ETFs.
What is VUG?
If you’re interested in investing in the stock market, you might have come across VUG and SCHG ETFs.
In this section, I will introduce VUG, a Vanguard Large Growth fund, and explain how it works and what are the benefits of investing in it.
How does VUG work?
VUG is a passively managed fund by Vanguard that tracks the performance of the CRSP U.S. Large Cap Growth Index.
This index includes large-cap U.S. growth stocks, which are companies that are expected to grow at a faster rate than the overall market.
VUG invests in these stocks and aims to replicate the index’s performance.
VUG’s holdings are diversified across various sectors, including technology, healthcare, consumer discretionary, and communication services.
This diversification helps reduce the risk of investing in a single sector and provides exposure to different industries.
What are the benefits of investing in VUG?
One of the main benefits of investing in VUG is its low expense ratio of 0.04%.
This means that VUG charges only $4 for every $10,000 invested, which is significantly lower than the average expense ratio for mutual funds and ETFs.
Another benefit of investing in VUG is its exposure to large-cap U.S. growth stocks, which have historically provided higher returns than the overall market.
By investing in VUG, you can gain exposure to these stocks and potentially benefit from their growth.
VUG is also a tax-efficient investment because it has low turnover, which means that it buys and sells stocks less frequently than actively managed funds.
This results in lower capital gains distributions and lower taxes for investors.
| Benefits of investing in VUG |
|---|
| Low expense ratio |
| Exposure to large-cap U.S. growth stocks |
| Tax efficiency |
Overall, VUG is a low-cost, diversified investment that provides exposure to large-cap U.S. growth stocks.
If you’re looking for a long-term investment that can potentially provide higher returns than the overall market, VUG might be a good option for you.
SCHG vs VUG
When it comes to investing in growth ETFs, SCHG and VUG are two popular options available in the market.
Both ETFs aim to provide investors with exposure to large-cap growth stocks in the US market.
However, there are some key differences between the two ETFs that investors should be aware of before making an investment decision.
What are the key differences between SCHG and VUG?
One of the key differences between SCHG and VUG is their expense ratio.
SCHG has a higher expense ratio of 0.04% compared to VUG’s expense ratio of 0.03%.
While this may not seem like a significant difference, it can add up over time and impact your overall returns.
Another difference between the two ETFs is their holdings. VUG includes 287 stocks in the ETF, while SCHG holds 229 stocks.
This means that VUG holds more companies compared to SCHG. However, both funds have the same sector diversification. SCHG is 50% technology which is the same as VUG.
VUG vs SCHG Performance
When it comes to performance, both SCHG and VUG have delivered strong returns in the past.
However, it’s important to note that past performance is not a guarantee of future results.
According to ETF.com, as of April 12th, 2023, VUG has a year-to-date return of 10.68%, while SCHG has a year-to-date return of 10.29%.
VUG vs SCHG Holdings
As mentioned earlier, VUG holds more companies compared to SCHG. This means that VUG provides investors with more diversification compared to SCHG.
It’s important to note that both ETFs have the same sector diversification. SCHG is 50% technology which is the same as VUG.
Which one is better for you?
Deciding between SCHG and VUG ultimately depends on your investment goals and risk tolerance. If you’re looking for a lower expense ratio, VUG may be a better option for you.
However, if you’re comfortable with a slightly higher expense ratio and want exposure to a smaller number of companies, SCHG may be a better fit.
It’s important to do your research and understand the differences between the two ETFs before making an investment decision.
SCHG vs VUG: Best For Financial Independence?
When it comes to financial independence, choosing the right investment can make all the difference.
Both VUG and SCHG are growth ETFs that can help you achieve your financial goals, but which one is better for financial independence?
Let’s take a closer look at some of the key differences between VUG and SCHG:
Number of Holdings: VUG holds more companies compared to SCHG, with 287 holdings compared to only 229 with SCHG. This means that VUG offers slightly more diversification, which can be beneficial for long-term investors.
Expense Ratio: Both funds have the same expense ratio of 0.04%, which is incredibly low compared to other ETFs. This means that you’ll pay just $4 for every $10,000 invested.
Dividend Yield: VUG’s dividend yield is 0.14% higher than that of SCHG, with 0.57% versus 0.43%. While this may seem like a small difference, it can add up over time.
Performance: Both VUG and SCHG have performed well over the past decade, with average annual returns of 17.58% and 17.81%, respectively. However, past performance is not a guarantee of future results.
Holdings: While both funds have the same sector diversification, SCHG is 50% technology, which is the same as VUG. However, SCHG has a higher concentration in the top 10 holdings, with 44% compared to VUG’s 32%.
Both VUG and SCHG are great options for financial independence. However, if you’re looking for slightly more diversification, VUG may be the better choice.
On the other hand, if you’re comfortable with a higher concentration in the top 10 holdings and want exposure to a slightly different set of companies, SCHG may be the way to go.
The decision comes down to your personal investment goals and risk tolerance.
Verdict: SCHG vs VUG
After analyzing the differences between SCHG and VUG, I can confidently say that both ETFs are great options for investors who are looking for exposure to large-cap growth stocks.
However, there are some key differences between these funds that investors should consider before making a decision.
Expense Ratio: Both SCHG and VUG have the same expense ratio of 0.04%, which is significantly lower than the average expense ratio for similar funds.
Number of Holdings: VUG holds 287 companies, while SCHG holds 229. This means that VUG provides slightly more diversification than SCHG. However, both funds hold a similar number of companies and are well-diversified across various sectors.
Top Holdings: The top five holdings of VUG are Apple, Microsoft, Amazon, Facebook, and Alphabet (Google), while the top five holdings of SCHG are Apple, Microsoft, Amazon, Alphabet (Google), and Facebook. As you can see, the top holdings of both funds are very similar, which means that investors can expect similar performance from both funds.
Performance: Over the past 10 years, VUG has outperformed SCHG by a small margin. However, past performance is not a guarantee of future results, and both funds have a strong track record of delivering solid returns.
Both SCHG and VUG are excellent ETFs that provide exposure to large-cap growth stocks. While VUG offers slightly more diversification, both funds have a similar number of holdings and top holdings.
The decision between these two funds will come down to an investor’s personal preferences and investment goals.
FAQs: VUG vs SCHG
Is SCHG a good long term investment?
According to Morningstar, Schwab US Large-Cap Growth ETF (SCHG) is an excellent large-growth fund (source: morningstar.com).
Additionally, StockInvest.us reports that the Schwab U.S. Large-Cap Growth ETF holds buy signals from both short and long-term moving averages, giving a positive forecast for the stock (source: stockinvest.us).
However, Seeking Alpha reports that SCHG is a very concentrated ETF, not only by its sector exposures but by its concentration in its top ten assets (source: seekingalpha.com).
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