VGT vs SCHG Understanding the Key Differences

The Vanguard Information Technology Index Fund ETF Shares (VGT) and the Schwab U.S. Large-Cap Growth ETF (SCHG) are two of the most popular ETFs in the market. Both funds offer investors a way to gain exposure to large-cap growth stocks, but there are some key differences between the two.

VGT vs SCHG: VGT focuses on the technology sector, while SCHG invests in large-cap growth stocks across various sectors. This means that VGT has a higher exposure to technology stocks, while SCHG is more diversified. Secondly, VGT has a higher expense ratio and standard deviation than SCHG, which can affect overall returns. Finally, VGT has provided higher returns than SCHG over the past ten years.

In this article, I’ll delve deeper into the differences between VGT and SCHG.

I’ll provide a detailed analysis of their portfolio growth, annual returns, industry exposure, and holdings. Additionally, I’ll examine their fund composition, risk metrics, and performance to help you decide which fund is the better investment for you.

What Is VGT?

VGT vs SCHG Understanding the Key Differences
VGT vs SCHG Understanding the Key Differences

VGT is an exchange-traded fund (ETF) managed by Vanguard that tracks the performance of the MSCI US Investable Market Information Technology 25/50 Index.

This index includes stocks of large, mid, and small-cap companies in the U.S. information technology sector. VGT is one of the largest and most popular technology ETFs, with over $35 billion in assets under management.

Compared to SCHG, VGT has a higher expense ratio of 0.1% compared to SCHG’s 0.04%. However, VGT has also provided higher returns than SCHG over the past ten years.

VGT’s mean return is 0.30 points higher than that of SCHG, and its R-squared is 18.08 points lower. With a Standard Deviation of 16.61, VGT is slightly more volatile than SCHG. The Alpha and Beta of VGT are 8.44 points higher and 0.03 points lower than SCHG’s Alpha and Beta.

VGT has a higher exposure to the technology sector than SCHG. As of March 31, 2021, VGT’s top holdings include Apple Inc., Microsoft Corp., and Alphabet Inc. Class A.

These three companies alone make up over 35% of VGT’s holdings. VGT also has a higher standard deviation than SCHG, meaning that it is slightly more volatile.

What Is SCHG?

SCHG is a Schwab ETFs Large Growth fund that seeks to track the performance of the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. The fund invests in large-cap growth stocks, which are companies that are expected to grow faster than the overall market.

The Dow Jones U.S. Large-Cap Growth Total Stock Market Index includes the components ranked 1-750 by full market capitalization and that are classified as growth based on a number of factors. SCHG has a lower expense ratio than VGT (0.04% vs 0.1%).

It has a lower exposure to the technology sector than VGT, with only about 30% of its holdings in technology. The fund also has a lower standard deviation than VGT, indicating that it is less volatile. The top holdings of SCHG are dominated by technology companies, with Apple, Microsoft, and Amazon being the top three holdings. Other top holdings include Facebook, Alphabet, and Tesla.

SCHG has provided solid returns over the past ten years, although it has underperformed VGT during this time.

Investing in VGT vs SCHG

When it comes to investing in ETFs, it’s important to understand the differences between funds to make informed investment decisions.

In this section, I’ll compare VGT and SCHG in terms of their performance, risk, and expense ratio.

Performance Comparison VGT vs SCHG

Over the past ten years, VGT has provided higher returns than SCHG. According to Mr. Marvin Allen, VGT’s mean return is 0.30 points higher than SCHG’s, and its alpha and beta are 8.44 points higher and 0.03 points lower than SCHG’s.

VOO Vs SCHD: What’s The Difference?

The Vanguard Information Technology ETF (VGT) includes 333 stocks from the information technology sector, such as Apple, Microsoft, Visa, and NVIDIA. On the other hand, Schwab U.S. Large-Cap Growth ETF (SCHG) invests in stocks of large-cap companies that are expected to grow faster than other large-cap stocks.

Risk Comparison VGT vs SCHG

VGT is slightly more volatile than SCHG, with a standard deviation of 16.61. However, VGT has a lower R-squared than SCHG, which means that its returns are less correlated with the overall market.

VGT’s higher exposure to the technology sector also means that it’s more susceptible to industry-specific risks, such as changes in technology trends or regulations.

Expense Ratio Comparison VGT vs SCHG

The expense ratio of VGT is 0.06 percentage points higher than SCHG’s (0.1% vs. 0.04%). While this may seem like a small difference, it can add up over time and affect your overall returns.

In conclusion, both VGT and SCHG are excellent ETFs that offer exposure to different sectors and investment styles.

However, VGT’s higher returns and exposure to the technology sector may make it a better option for investors looking for growth opportunities.

On the other hand, SCHG’s lower expense ratio and focus on large-cap growth stocks may be more suitable for investors who want a more diversified portfolio.

VGT vs SCHG Which One Should You Choose?

So, which ETF should you choose between VGT and SCHG? It depends on your investment goals and risk tolerance.

If you’re looking for exposure to the technology sector, VGT is the better choice. It has a higher exposure to the technology sector and has provided higher returns than SCHG over the past ten years.

However, keep in mind that VGT has a higher expense ratio and a higher standard deviation than SCHG. If you prefer a more diversified portfolio, SCHG may be a better option. It has a lower expense ratio and a lower standard deviation than VGT.

However, it has a lower exposure to the technology sector and has provided lower returns than VGT over the past ten years. Ultimately, the decision between VGT and SCHG depends on your investment goals and risk tolerance.

If you’re willing to take on more risk for the potential of higher returns, VGT may be the better choice. If you prefer a more conservative approach with lower expenses and lower risk, SCHG may be a better option.

Bottom Line: VGT vs SCHG

The Vanguard Information Technology Index Fund ETF Shares (VGT) and the Schwab U.S. Large-Cap Growth ETF (SCHG) are both popular ETFs that investors often compare. While both funds have similarities, they also have some key differences that investors should be aware of before investing.

One of the main differences between VGT and SCHG is their expense ratio. VGT has an expense ratio of 0.1% while SCHG has an expense ratio of 0.04%. This means that investors in VGT will pay more in fees than investors in SCHG.

Another key difference between the two funds is their industry exposure. VGT has a higher exposure to the technology sector than SCHG.

This means that VGT investors will be more exposed to the tech industry and its performance. SCHG, on the other hand, has a broader exposure to large-cap growth stocks across various industries.

When it comes to performance, VGT has provided higher returns than SCHG over the past ten years.

A $10,000 investment in VGT would have resulted in a final balance of $64,500, while a $10,000 investment in SCHG would have resulted in a final balance of $47,556.

While both VGT and SCHG have their strengths and weaknesses, investors should carefully consider their investment goals and risk tolerance before choosing between the two funds.

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