Amid the current market selloff, many great growth stocks are trading at far lower prices, and using an ETF is an effective way for long-term investors to gain exposure to many of them all at once. The Schwab U.S. Large-Cap Growth ETF (SCHG) is an excellent vehicle for accomplishing this. SCHG itself is down 10.8% from its 52-week high, creating an attractive opportunity for investors to gain exposure to large-cap growth stocks in a bundle.
I’m bullish on SCHG based on its exemplary long-term performance, diversified portfolio of blue-chip growth stocks, and affordable expense ratio. Additionally, Wall Street analysts collectively rate SCHG a Strong Buy and forecast a potential upside of more than 25% over the next 12 months.
What is SCHG’s Strategy?
Launched in 2009, SCHG is a popular ETF from Charles Schwab that focuses on large-cap growth stocks. Over time, the fund has grown to $36.6 billion in assets under management. It tracks the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. Charles Schwab touts that SCHG provides “simple access to large-cap U.S. equities that exhibit growth style characteristics.”
As of writing, SCHG has allocated a third of its total assets towards Apple, Microsoft, Nvidia, Amazon, and Meta stocks, clearly giving this ETF a strong tech-sector bias. Notably, SCHG underwent a four-for-one stock split in October 2024.
SCHG’s Market-Beating Performance
Perhaps SCHG’s most compelling feature is its outstanding performance track record over the years. As of the most recent monthly close, SCHG has produced a strong annualized three-year return of 15.7%. Notably, this return has beaten that of the broader market over this time — the Vanguard S&P 500 ETF (VOO) has an annualized return of 12.5% over the same time frame.
SCHG has also beaten the market over a five-year time horizon. As of the same monthly close, SCHG has an outstanding five-year annualized return of 20.2% versus an annualized return of 16.8% for VOO. SCHG has even beaten the broader market over the last decade. As of the same date, SCHG boasts an impressive annualized return of 15.8% versus a return of 12.9% for VOO.
It should be noted that past performance is no guarantee of future results, but this is a very compelling track record. Very few funds beat the market over the long run, but SCHG has consistently beaten it over the past three, five, and 10 years by a decent margin, making this ETF a true long-term winner. The ETF also pays a small dividend of $0.027 per share (0.44%).
Notably, this period of outperformance includes periods like the beginning of this year, when growth stocks sold off, and 2022, which was a bear market for growth stocks, showing the ETF’s capability to bounce back from challenging market environments.
What Are the Top 10 Holdings in SCHG?
SCHG gives investors exposure to 225 growth stocks in one investment. The fund’s top 10 holdings account for 54.4% of its assets.
SCHG’s top 10 holdings feature many of the market’s top growth stocks, including top tech names like the magnificent seven stocks and semiconductor leader Broadcom (AVGO). These big tech firms have powered the broader market indices higher in recent years, as well as many promising long-term themes expected to drive future growth, such as artificial intelligence, quantum computing, robotics, and self-driving cars.
But SCHG isn’t limited to tech as pharma giant Eli Lilly (LLY) also finds a place within SCHG’s top holdings, and additional notable holdings include growth stocks from other sectors like Costco (COST), Mastercard (MA), GE Aerospace (GE), Thermo Fisher Scientific (TMO) and Linde (LIN). SCHG skews towards top tech names but offers diversification into other sectors as well.
As a testament to SCHG’s stock picks, its top holdings are littered with stocks featuring high Smart Scores—a proprietary quantitative stock scoring system created by TipRanks. SCHG itself clocks in with a strong, Outperform-equivalent ETF Smart Score of 8 out of 10.
Ultra-Low Fees Assist Bullish Case
Another compelling reason to invest in SCHG is its ultra-low expense ratio. The popular ETF has an expense ratio of 0.04%, meaning that an investor allocating $10,000 into SCHG will pay a mere $4 in fees annually. This is one of the lowest expense ratios out there today and can be viewed as even more of a bargain based on SCHG’s excellent performance.
Assuming that the fund returns 5% per year going forward and maintains its current expense ratio, an investor in SCHG will pay just $23 in fees over the course of five years.
Is SCHG a Buy Right Now?
On Wall Street, SCHG earns a Strong Buy consensus rating based on 199 Buys, 27 Holds, and one Sell rating assigned in the past three months. The average analyst SCHG stock price target of $33.71 implies ~30% upside potential from current levels.
Momentary Weakness Offers Investor Value
SCHG is in correction territory, down 11% from its 52-week high and 5.2% over the past month. Many of the top growth stocks it holds are down even more from their recent highs.
However, its history of strong outperformance shows us that this could be a good opportunity to buy the dip on this long-term winner. The fund has consistently and soundly outperformed the broader market over the past three, five, and ten years. I’m bullish on SCHG based on its history of strong results, a strong portfolio of highly rated growth stocks, and a favorable expense ratio. Additionally, sell-side analysts view it as a Strong Buy and believe it has an upside of over 30% over the next year.