VGT vs. SCHB: What’s The Difference?

The Vanguard Information Technology Index Fund ETF Shares (VGT) and the Schwab U.S. Broad Market ETF (SCHB) are both among the Top 100 ETFs. VGT is a Vanguard Technology fund and SCHB is a Schwab ETFs Large Blend fund. So, what’s the difference between VGT and SCHB? And which fund is better?

The expense ratio of VGT is 0.07 percentage points higher than SCHB’s (0.1% vs. 0.03%). VGT also has a higher exposure to the technology sector and a higher standard deviation. Overall, VGT has provided higher returns than SCHB over the past ten years.

In this article, we’ll compare VGT vs. SCHB. We’ll look at industry exposure and risk metrics, as well as at their fund composition and annual returns. Moreover, I’ll also discuss VGT’s and SCHB’s holdings, performance, and portfolio growth and examine how these affect their overall returns.

Summary

VGT SCHB
Name Vanguard Information Technology Index Fund ETF Shares Schwab U.S. Broad Market ETF
Category Technology Large Blend
Issuer Vanguard Schwab ETFs
AUM 54.13B 21.44B
Avg. Return 20.84% 14.43%
Div. Yield 0.66% 1.39%
Expense Ratio 0.1% 0.03%

The Vanguard Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.

The Schwab U.S. Broad Market ETF (SCHB) is a Large Blend fund that is issued by Schwab ETFs. It currently has 21.44B total assets under management and has yielded an average annual return of 14.43% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.03%.

VGT’s dividend yield is 0.73% lower than that of SCHB (0.66% vs. 1.39%). Also, VGT yielded on average 6.40% more per year over the past decade (20.84% vs. 14.43%). The expense ratio of VGT is 0.07 percentage points higher than SCHB’s (0.1% vs. 0.03%).

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Fund Composition

Industry Exposure

VGT vs. SCHB - Industry Exposure

VGT SCHB
Technology 88.89% 24.15%
Industrials 1.67% 9.29%
Energy 0.0% 2.78%
Communication Services 0.61% 10.52%
Utilities 0.0% 2.32%
Healthcare 0.0% 13.37%
Consumer Defensive 0.0% 5.76%
Real Estate 0.0% 3.58%
Financial Services 8.83% 13.88%
Consumer Cyclical 0.0% 11.9%
Basic Materials 0.0% 2.45%

The Vanguard Information Technology Index Fund ETF Shares (VGT) has the most exposure to the Technology sector at 88.89%. This is followed by Financial Services and Industrials at 8.83% and 1.67% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

VGT’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Energy, Communication Services, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.61%, and 1.67%.

The Schwab U.S. Broad Market ETF (SCHB) has the most exposure to the Technology sector at 24.15%. This is followed by Financial Services and Healthcare at 13.88% and 13.37% respectively. Basic Materials (2.45%), Energy (2.78%), and Real Estate (3.58%) only make up 8.81% of the fund’s total assets.

SCHB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.76%, 9.29%, 10.52%, 11.9%, and 13.37%.

VGT is 64.74% more exposed to the Technology sector than SCHB (88.89% vs 24.15%). VGT’s exposure to Financial Services and Industrials stocks is 5.05% lower and 7.62% lower respectively (8.83% vs. 13.88% and 1.67% vs. 9.29%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 21.24% less of the fund’s holdings compared to SCHB (0.00% vs. 21.24%).

Holdings

VGT - Holdings

VGT Holdings Weight
Apple Inc 19.58%
Microsoft Corp 16.53%
NVIDIA Corp 4.22%
Visa Inc Class A 3.16%
PayPal Holdings Inc 2.76%
Mastercard Inc Class A 2.76%
Adobe Inc 2.39%
Intel Corp 1.94%
Salesforce.com Inc 1.91%
Cisco Systems Inc 1.9%

VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.

Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.

SCHB - Holdings

SCHB Holdings Weight
Apple Inc 4.86%
Microsoft Corp 4.61%
Amazon.com Inc 3.33%
Facebook Inc A 1.88%
Alphabet Inc A 1.66%
Alphabet Inc Class C 1.61%
Berkshire Hathaway Inc Class B 1.19%
Tesla Inc 1.18%
NVIDIA Corp 1.13%
JPMorgan Chase & Co 1.06%

SCHB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 4.86%, 4.61%, 3.33%, 1.88%, and 1.66%.

Alphabet Inc Class C (1.61%), Berkshire Hathaway Inc Class B (1.19%), and Tesla Inc (1.18%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHB’s holdings at 1.13% and 1.06%.

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Risk Analysis

VGT SCHB
Mean Return 1.76 1.23
R-squared 74.84 99.33
Std. Deviation 16.61 14.12
Alpha 10.41 -0.58
Beta 1.02 1.04
Sharpe Ratio 1.23 1
Treynor Ratio 20.55 13.58

The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Standard Deviation of 16.61 with a Mean Return of 1.76 and a Sharpe Ratio of 1.23. Its Alpha is 10.41 while VGT’s Treynor Ratio is 20.55. Furthermore, the fund has a Beta of 1.02 and a R-squared of 74.84.

The Schwab U.S. Broad Market ETF (SCHB) has a Beta of 1.04 with a Standard Deviation of 14.12 and a Alpha of -0.58. Its Mean Return is 1.23 while SCHB’s Treynor Ratio is 13.58. Furthermore, the fund has a R-squared of 99.33 and a Sharpe Ratio of 1.

VGT’s Mean Return is 0.53 points higher than that of SCHB and its R-squared is 24.49 points lower. With a Standard Deviation of 16.61, VGT is slightly more volatile than SCHB. The Alpha and Beta of VGT are 10.99 points higher and 0.02 points lower than SCHB’s Alpha and Beta.

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Performance

Annual Returns

VGT vs. SCHB - Annual Returns

Year VGT SCHB
2020 45.94% 20.77%
2019 48.68% 30.94%
2018 2.52% -5.25%
2017 37.07% 21.18%
2016 13.73% 12.56%
2015 5.02% 0.45%
2014 18.01% 12.67%
2013 30.91% 33.37%
2012 14.05% 16.22%
2011 0.52% 1.4%
2010 12.74% 17.1%

VGT had its best year in 2019 with an annual return of 48.68%. VGT’s worst year over the past decade yielded 0.52% and occurred in 2011. In most years the Vanguard Information Technology Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 13.73%, 14.05%, and 18.01% respectively.

The year 2013 was the strongest year for SCHB, returning 33.37% on an annual basis. The poorest year for SCHB in the last ten years was 2018, with a yield of -5.25%. Most years the Schwab U.S. Broad Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 12.67%, 16.22%, and 17.1% respectively.

Portfolio Growth

VGT vs. SCHB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VGT $10,000 $64,500 20.84%
SCHB $10,000 $36,354 14.43%

A $10,000 investment in VGT would have resulted in a final balance of $64,500. This is a profit of $54,500 over 10 years and amounts to a compound annual growth rate (CAGR) of 20.84%.

With a $10,000 investment in SCHB, the end total would have been $36,354. This equates to a $26,354 profit over 10 years and a compound annual growth rate (CAGR) of 14.43%.

VGT’s CAGR is 6.40 percentage points higher than that of SCHB and as a result, would have yielded $28,146 more on a $10,000 investment. Thus, VGT outperformed SCHB by 6.40% annually.


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