Growth stocks have powered the market higher this year, and the Vanguard S&P 500 ETF (VOOG) and the Schwab U.S. Large Cap Growth ETF (SCHG) are two of the market’s best and most popular growth ETFs. These two ETFs from blue chip asset managers feature portfolios full of top growth stocks, strong histories of performance, and low fees. While they are both good options, one has the edge. Which is the better opportunity for investors going forward?
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What Is the VOOG ETF’s Strategy?
According to index fund giant Vanguard, VOOG “Invests in stocks in the Standard & Poor’s 500 Growth Index, composed of the growth companies in the S&P 500.”
What Is the SCHG ETF’s Strategy?
According to Charles Schwab (SCHW), SCHG is “a straightforward, low-cost fund offering potential tax efficiency.” Schwab says SCHG gives investors “Simple access to large-cap U.S. equities that exhibit growth style characteristics.”
Analyzing VOOG’s Portfolio
VOOG holds 236 stocks, and its top 10 holdings account for 60.2% of the fund.
Below, you can check out an overview of VOOG’s top 10 holdings using TipRanks’ holdings tool.
As you can see, VOOG has large positions in many of the market’s largest and most well-known growth stocks, including Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Amazon (AMZN), Meta Platforms (META), Alphabet (GOOG) (GOOGL), Broadcom (AVGO), Tesla (TSLA) and more.
These are many of the U.S. market’s most dominant and innovative companies, and the types of growth stocks that investors want exposure to over the long term. Many of them also feature strong Smart Scores.
The Smart Score is TipRanks’ quantitative stock scoring system that scores stocks from one to 10, based on eight key market factors. Scores of eight, nine, or 10 are equivalent to an Outperform rating. Nvidia and Meta Platforms feature perfect 10 Smart Scores, while Apple, Amazon, and Alphabet also feature Outperform-equivalent Smart Scores. An impressive six out of VOOG’s top 10 holdings feature Outperform-equivalent Smart Scores.
Taking Stock of SCHG’s Portfolio
SCHG is fairly similar to VOOG in that it holds 230 stocks, and its top 10 holdings make up a slightly lower 54.2% of the fund.
You can see an overview of SCHG’s top 10 holdings using TipRanks’ holdings tool below.
As you can see, SCHG’s top 10 holdings are quite similar to VOOG’s, albeit with slightly different weighting and positioning. For example, Nvidia is SCHG’s largest holding, while it is VOOG’s third-largest holding (behind Microsoft and Apple).
As such, like VOOG, six out of SCHG’s top 10 holdings boast Outperform-equivalent Smart Scores of 8 or above.
Performance Comparison
VOOG and SCHG have both been strong long-term performers. However, one of the funds has a decided edge in performance over the past three, five, and ten years.
As of October 31, VOOG has a fairly pedestrian three-year annualized return of 6.6%. SCHG has handily beaten this performance with a three-year annualized return of 9.3% as of the same date.
VOOG has a more impressive five-year annualized return of 16.9% as of October 31, but SCHG again beats it with a sparkling 19.7% annualized return over the same time frame.
Going out to 10 years, VOOG has an impressive annualized return of 14.6% as of October 31, but SCHG pips it again with an annualized 16.1% return over the same time span.
Based on the fact that it has beaten VOOG over the past three, five, and 10 years, SCHG looks like the superior choice when it comes to long-term performance, although both funds have obviously done well over the past decade.
Cost Comparison
Vanguard is known as a pioneer in low-cost index funds, and as such, VOOG unsurprisingly features a favorable expense ratio of just 0.10%. This means that an investor in the fund will pay just $10 in fees on a $10,000 investment annually.
While Vanguard is known for its low fees, and it’s hard to find fault in an investor-friendly 0.10% expense ratio, SCHG comes in wich an even cheaper expense ratio of just 0.04%. An investor allocating $10,000 into SCHG will pay just $4 in fees on a $10,000 investment annually.
VOOG’s expense ratio is quite low but is still 2.5 times higher than SCHG’s. Assuming each fund returns 5% going forward and maintains its current expense ratio, the investor putting $10,000 into VOOG will pay $128 in fees over the next decade, while an investor putting the same amount into SCHG will pay just $51 over the same time horizon, making SCHG the winner in the cost category between these two cost-effective options.
You can compare VOOG and SCHG based on expense ratio and other factors using TipRanks’ ETF Comparison Tool. This tool allows investors to compare and analyze up to 20 ETFs at a time based on a variety of customizable criteria.
Is VOOG Stock a Buy, According to Analysts?
Turning to Wall Street, VOOG earns a Hold consensus rating based on 192 Buys, 41 Holds, and three Sells ratings assigned in the past three months. The average VOOG stock price target of $400.35 implies an 11.33% upside potential from current levels.
Is SCHG Stock a Buy, According to Analysts?
Turning to Wall Street, SCHG earns a Hold consensus rating based on 193 Buys, 36 Holds, and one Sell rating assigned in the past three months. The average SCHG stock price target of $30.11 implies a 10.03% upside potential from current levels.
Two Strong Choices, but Only One Winner
These are two strong ETFs that have made their long-term investors quite happy and generated considerable wealth over the years. They both feature perfect 10 Smart Scores, similar analyst outlooks, and fairly similar portfolios of top growth stocks.
However, SCHG is the clear-cut winner because it has consistently beaten VOOG’s performance over the past three, five, and 10 years. Furthermore, while VOOG features a cheap expense ratio, it’s still 2.5 times higher than SCHG’s, further adding to SCHG’s lead in this competition between top growth ETFs.
