SCHB vs SCHG: A Comparison of Two Popular ETFs

If you’re considering investing in the stock market, you might be wondering which exchange-traded fund (ETF) is right for you.

Two popular options are the Schwab U.S. Broad Market ETF (SCHB) and the Schwab U.S. Large-Cap Growth ETF (SCHG).

SCHB vs SCHG: Both ETFs are offered by Charles Schwab and are designed to provide investors with exposure to the U.S. stock market.

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SCHB is designed to track the performance of the Dow Jones U.S. Broad Stock Market Index, which includes more than 2,500 stocks. SCHG, on the other hand, is designed to track the performance of the Dow Jones U.S. Large-Cap Growth Total Stock Market Index, which includes about 250 large-cap stocks that are expected to grow faster than the overall market.

In this article, we’ll dive deeper into the differences between SCHB and SCHG to help you make an informed decision about which ETF is right for you. We’ll look at their investment strategies, risk and volatility, top holdings, and sector allocation, as well as their comparative analysis. By the end of this article, you should have a better understanding of which ETF is the right choice for your investment goals.

Key Takeaways SCHB vs SCHG

  • SCHB and SCHG are both ETFs offered by Charles Schwab that provide exposure to the U.S. stock market.
  • SCHB tracks the performance of the Dow Jones U.S. Broad Stock Market Index, while SCHG tracks the performance of the Dow Jones U.S. Large-Cap Growth Total Stock Market Index.
  • When deciding between SCHB and SCHG, it’s important to consider their investment strategies, risk and volatility, top holdings, and sector allocation.

Understanding SCHB vs SCHG

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If you are looking to invest in a broad market ETF, then you might be considering Schwab U.S. Broad Market ETF (SCHB) or Schwab U.S. Large-Cap Growth ETF (SCHG). Both ETFs are offered by Charles Schwab and have some similarities and differences.

Fund Objectives

SCHB aims to track the Dow Jones U.S. Broad Stock Market Index, which includes over 2,500 stocks of U.S. companies. The index covers the entire U.S. stock market, including large, mid, and small-cap stocks. The ETF provides exposure to a diversified portfolio of U.S. stocks and aims to replicate the performance of the underlying index.

On the other hand, SCHG aims to track the Dow Jones U.S. Large-Cap Growth Total Stock Market Index, which includes large-cap U.S. growth stocks. The index comprises stocks of companies that are expected to have higher earnings growth rates than the average of the broad U.S. equity market. The ETF provides exposure to a concentrated portfolio of large-cap growth stocks and aims to replicate the performance of the underlying index.

Underlying Indexes

Both ETFs track different underlying indexes, which means they have different holdings and weightings. SCHB holds a broad range of stocks across various sectors, while SCHG holds a concentrated portfolio of large-cap growth stocks, with a higher weighting in the technology sector.

ETFUnderlying IndexNumber of HoldingsExpense Ratio
SCHBDow Jones U.S. Broad Stock Market Index2,500+0.03%
SCHGDow Jones U.S. Large-Cap Growth Total Stock Market Index2500.04%

SCHB has a higher number of holdings than SCHG, which means it provides more diversification across various sectors and market capitalizations. However, SCHG has a more concentrated portfolio of large-cap growth stocks, which could potentially provide higher returns but also higher risk.

In conclusion, both SCHB and SCHG are suitable for investors with different investment objectives. If you are looking for exposure to a diversified portfolio of U.S. stocks, SCHB could be a good option. On the other hand, if you are looking for exposure to a concentrated portfolio of large-cap growth stocks, SCHG could be a good option.

Comparative Analysis SCHB vs SCHG

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When comparing SCHB and SCHG, there are several factors to consider. In this section, we will analyze the performance, expense ratio, and dividend yield of both ETFs.

Performance Comparison

SCHB and SCHG have different investment strategies, with SCHB tracking the entire U.S. stock market and SCHG focusing on large-cap growth stocks. Over the past 10 years, SCHG has outperformed SCHB with an average annual return of 16.12% compared to SCHB’s 14.26%. However, past performance is not a guarantee of future results.

Expense Ratio Comparison

Expense ratio is an important factor to consider when investing in ETFs. SCHB has a lower expense ratio of 0.03% compared to SCHG’s 0.04%. This means that for every $1,000 invested, you would pay $0.30 in fees for SCHB and $0.40 for SCHG.

Dividend Yield Comparison

Both SCHB and SCHG offer dividend yields, with SCHB’s yield being slightly higher at 1.96% compared to SCHG’s 0.71%. However, it’s important to note that SCHG’s focus on growth stocks means that it may not prioritize dividend payments as much as SCHB.

In summary, when comparing SCHB and SCHG, SCHG has outperformed SCHB in terms of returns, but SCHB has a lower expense ratio and higher dividend yield. Ultimately, the choice between these two ETFs depends on your investment goals and risk tolerance.

Investment Strategies

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When it comes to investing in SCHB vs SCHG, you need to have a clear investment strategy in mind. Both ETFs are excellent options for investors seeking broad exposure to the US stock market, but they differ in their approach to investing.

When to Hold SCHB

SCHB is a great option for investors who want to build a diversified portfolio of US stocks. This ETF tracks the Dow Jones US Broad Stock Market Index, which includes more than 2,500 stocks across all sectors of the US economy. If you’re looking for a low-cost way to gain exposure to the US stock market, SCHB is an excellent choice.

SCHB is also a good option for investors who prefer a buy-and-hold strategy. This ETF has a low expense ratio of 0.03%, which means that you can hold it for the long term without worrying about high fees eating into your returns. Additionally, SCHB has a low turnover rate, which means that it doesn’t buy and sell securities frequently. This can help reduce your tax bill if you hold SCHB in a taxable account.

When to Opt for SCHG

SCHG is a better option for investors who want to focus on large-cap growth stocks. This ETF tracks the Dow Jones US Large-Cap Growth Total Stock Market Index, which includes large-cap US stocks that are expected to grow at a faster rate than the overall market. If you believe that large-cap growth stocks will outperform the broader market in the long run, SCHG is a good option to consider.

SCHG is also a good choice for investors who prefer an active investment strategy. This ETF has a higher expense ratio of 0.04%, but it is actively managed, which means that the fund manager can buy and sell securities as needed to try to outperform the benchmark index. If you’re comfortable with a higher expense ratio and want to try to beat the market, SCHG may be a good choice for you.

In summary, both SCHB and SCHG are excellent options for investors seeking broad exposure to the US stock market. Your choice between the two ETFs will depend on your investment strategy and your personal preferences. If you prefer a passive buy-and-hold strategy and want low-cost exposure to the US stock market, SCHB is a good choice. If you prefer an active investment strategy and want to focus on large-cap growth stocks, SCHG may be a better option.

Risk and Volatility

When considering an investment in the stock market, it’s important to assess the level of risk and volatility associated with a particular security. In the case of SCHB and SCHG, there are some key differences to consider.

Risk-Adjusted Performance Comparison

One way to evaluate the risk associated with an investment is to look at its risk-adjusted performance. This takes into account the level of risk associated with the investment and compares it to the return it has generated.

According to a comparison tool by PortfoliosLab, SCHB has a higher Sharpe ratio than SCHG, indicating that it has generated a higher return relative to the level of risk it has taken on. Additionally, SCHB has a lower beta than SCHG, which means that it is less sensitive to market fluctuations.

Volatility Comparison

Volatility is another important factor to consider when evaluating an investment’s risk. It refers to the degree to which the price of an asset fluctuates over time.

According to the same comparison tool, SCHG has a higher volatility than SCHB. This means that the price of SCHG is more likely to experience larger fluctuations than SCHB, making it a riskier investment in terms of price movements.

It’s worth noting that while SCHB may be less volatile than SCHG, it is still subject to market fluctuations and can experience significant drawdowns. According to a comparison analysis by ETF.com, SCHB has a higher daily standard deviation and a higher maximum drawdown than SCHG.

Overall, it’s important to consider both the risk-adjusted performance and volatility when evaluating an investment in SCHB or SCHG. While SCHB may be less risky than SCHG in terms of price movements, it’s important to remember that all investments carry some level of risk.

Top Holdings and Sector Allocation

When comparing SCHB and SCHG, it’s important to take a closer look at their top holdings and sector allocation. This information can help you understand the risk and return potential of each ETF.

Growth Stocks in SCHG

SCHG is focused on large-cap growth stocks, which can be seen in its top holdings. As of December 2, 2023, Apple Inc, Microsoft Corp, Amazon.com Inc, Nvidia Corp, and Tesla Inc were the top five holdings in SCHG. These companies are leaders in the technology and consumer sectors, which have been driving growth in the stock market in recent years.

SCHG has a higher percentage of assets invested in the Information Technology sector compared to SCHB, which can be a double-edged sword. While the tech sector has been performing well in recent years, it is also known for its volatility. As of December 2, 2023, SCHG had 44.23% of its assets invested in the Information Technology sector.

Marketplace Diversity in SCHB

SCHB, on the other hand, is a broad-market ETF that invests in a diverse range of companies across various sectors. Its top holdings include UnitedHealth Group Inc, Microsoft Corp, Apple Inc, Amazon.com Inc, and Nvidia Corp. As of December 2, 2023, SCHB had 2,080 holdings, which provides exposure to a wide range of companies in the US stock market.

SCHB has a more balanced sector allocation compared to SCHG. As of December 2, 2023, SCHB had 21.7% of its assets invested in the Information Technology sector, which is lower than SCHG. SCHB also has exposure to other sectors such as Healthcare, Financials, and Consumer Discretionary.

In terms of expenses, both SCHB and SCHG have low expense ratios, with SCHB having a slightly lower expense ratio of 0.03% compared to SCHG’s expense ratio of 0.04%.

Overall, when comparing SCHB and SCHG, it’s important to consider your investment goals and risk tolerance. If you’re looking for exposure to a diverse range of companies across various sectors, SCHB may be a better option. If you’re willing to take on more risk for the potential of higher returns, SCHG’s focus on large-cap growth stocks may be a better fit.

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