As an investor, I’m always on the lookout for the best investment opportunities. Recently, I’ve been comparing two ETFs: SCHG and VOO.
Both ETFs are popular in the U.S. markets, but they have different investment strategies and expense ratios.
SCHG vs VOO: First, let’s take a look at VOO. VOO is a Vanguard S&P 500 ETF that aims to track the performance of the S&P 500 index. It is a passive ETF that invests in the 500 largest publicly-traded companies in the U.S. VOO has a low expense ratio of 0.03%, which makes it an attractive investment option for investors who want to minimize their costs.
On the other hand, SCHG is a Schwab U.S. Large-Cap Growth ETF that aims to track the performance of the Dow Jones U.S. Large-Cap Growth Total Stock Market Index.
It is also a passive ETF that invests in large-cap growth stocks. However, SCHG has a slightly higher expense ratio of 0.04%.
Nonetheless, it has outperformed VOO in terms of returns in the past few years, making it an interesting investment option for growth-oriented investors.
What is SCHG?
As I compare SCHG vs VOO, it’s important to first understand what SCHG is. SCHG stands for Schwab U.S. Large-Cap Growth ETF.
It is an exchange-traded fund that focuses on investing in large-cap growth companies in the United States. The fund is issued by Schwab ETFs and has been in existence since December 2009.
The fund tracks the performance of the Dow Jones U.S. Large-Cap Growth Total Stock Market Total Return Index.
This index consists of companies that are expected to grow at a faster rate than the overall market. SCHG invests in companies that are expected to have higher earnings growth rates, higher price-to-earnings ratios, and higher price-to-book ratios compared to the broader market.
One of the benefits of investing in SCHG is that it provides exposure to a diversified portfolio of large-cap growth companies. The fund invests in companies across various sectors, including technology, healthcare, and consumer discretionary. This diversification helps to reduce the risk of investing in a single company or sector.
Another benefit of investing in SCHG is that it has a low expense ratio of 0.04%. This means that investors can keep more of their returns and pay less in fees compared to other funds with higher expense ratios. Additionally, the fund has a dividend yield of 0.43%, which can provide investors with a source of income.
What is VOO?
As I begin to compare SCHG and VOO, it’s important to understand what VOO is. VOO is an exchange-traded fund (ETF) that tracks the performance of the S&P 500 Index. This means that when you invest in VOO, you are investing in the 500 largest publicly traded companies in the United States.
VOO was launched on September 7, 2010, by Vanguard, which is one of the largest investment companies in the world. It has an expense ratio of 0.03%, which means that for every $1,000 you invest, you will pay $0.30 in fees.
One of the benefits of investing in VOO is that it provides investors with exposure to a broad range of companies across various sectors, including technology, healthcare, and finance. This diversification can help reduce the risk of your portfolio, as you are not relying on the performance of just one company or sector.
Comparison of SCHG vs VOO
Performance
When it comes to performance, both SCHG and VOO have shown impressive returns over the years. However, SCHG has provided higher returns than VOO over the past ten years. According to Mr. Marvin Allen, SCHG has a higher 5-year return than VOO (22.58% vs 17.47%).
It is important to note that past performance is not a guarantee of future results. Investors should always do their own research and consider their investment goals and risk tolerance before making any investment decisions.
Expense Ratio
Expense ratio is an important factor to consider when comparing ETFs. The expense ratio of VOO is 0.01 percentage points lower than SCHG’s (0.03% vs. 0.04%). This means that VOO is slightly cheaper to own than SCHG. However, the difference in expense ratio may not be significant enough to sway an investor’s decision.
Composition
Another important factor to consider is the composition of the ETFs. VOO tracks the S&P 500 index, which includes 500 large-cap U.S. stocks. On the other hand, SCHG tracks the Dow Jones U.S. Large-Cap Growth Total Stock Market Index, which includes large-cap U.S. growth stocks. According to ETF.com, VOO has a lower exposure to the technology sector than SCHG, while SCHG has a higher exposure to the healthcare sector.
Investors should consider their investment goals and risk tolerance when deciding between these two ETFs. VOO may be a better choice for investors looking for broad exposure to the U.S. stock market, while SCHG may be a better choice for investors looking for exposure to large-cap U.S. growth stocks.
Which one is right for you?
After comparing SCHG and VOO, you may still be wondering which one is the right fit for you. Here are some factors to consider:
- Investment goals: If your investment goal is to track the S&P 500 index, then VOO might be a better choice for you. However, if you want to focus on large-cap growth stocks, then SCHG might be a better option.
- Expense ratio: Both ETFs have very low expense ratios, but VOO has a slightly lower expense ratio than SCHG. If you are looking to save every penny, then VOO might be the better choice.
- Technology exposure: If you want more exposure to the technology sector, then VOO might not be the best choice for you. SCHG has a higher weight in the technology sector than VOO.
- Standard deviation: If you are risk-averse, then VOO might be a better choice for you. VOO has a lower standard deviation than SCHG, which means that it has less volatility.
Ultimately, the decision between SCHG and VOO depends on your individual investment goals and risk tolerance. Both ETFs have their own unique advantages and disadvantages, so it’s important to do your own research and consider what’s best for your portfolio.
Bottom Line: SCHG vs VOO
After comparing SCHG and VOO, I can say that both ETFs have their strengths and weaknesses. VOO is a great choice for investors who want to track the performance of the S&P 500 index without paying high fees. On the other hand, SCHG is a good option for those who are looking for a growth-focused ETF with a slightly higher expense ratio.
When it comes to diversification, VOO has a larger number of holdings and is more exposed to the technology sector compared to SCHG. However, SCHG has a higher weightage in consumer cyclical, healthcare, and industrials sectors. So, it depends on your investment goals and risk tolerance to choose between these two ETFs.
Another factor to consider is the expense ratio. VOO has a lower expense ratio of 0.03%, while SCHG has an expense ratio of 0.04%. Although the difference seems small, it can add up over time and affect your overall returns.
Both SCHG and VOO are solid ETF choices for investors who want to invest in large-cap US stocks. It is important to do your own research and consider your investment goals and risk tolerance before making any investment decisions.
