Comparing SCHG and QQQ: Which ETF Offers Better Exposure to Large-Cap Growth Stocks?

The article compares two popular large-cap growth ETFs, Schwab US Large-Cap Growth ETF (SCHG) and Invesco QQQ Trust ETF (QQQ), to determine which provides better exposure to growth. The author aims to analyze the performance and holdings of both ETFs to make an informed decision.

In the realm of large-cap growth ETFs, two standout funds often come to the forefront: the Schwab US Large-Cap Growth ETF (SCHG) and the Invesco QQQ Trust ETF (QQQ). Both funds aim to provide exposure to growth-oriented companies, but they differ in their strategies, holdings, and performance. This article compares these two ETFs to determine which offers better exposure to growth.

Performance Analysis

Over the past five years, SCHG has outperformed both the S&P 500 and the Nasdaq-100, offering total returns of 129.2 percent since 2020 SCHG: This Pure Growth Fund Is Better Positioned Now^[1]. In contrast, QQQ, which tracks the Nasdaq-100, has provided total returns of 122.7 percent over the same period. This difference in performance can be attributed to the unique composition and strategy of each ETF.

Holdings and Sector Allocation

SCHG is a pure growth fund, with a significant overweight to large-cap tech companies. Its top holdings include NVIDIA (NVDA), Microsoft (MSFT), Apple (AAPL), and Amazon (AMZN), which make up nearly 36 percent of the fund SCHG: This Pure Growth Fund Is Better Positioned Now^[1]. This concentration in large-cap tech allows SCHG to benefit from the strong performance of these companies.

QQQ, on the other hand, tracks the Nasdaq-100, which includes a mix of large-cap and mid-cap growth stocks. Its top holdings are similar to those of SCHG, but it also includes a broader range of companies, such as Tesla (TSLA), Facebook (FB), and Alphabet (GOOGL). This broader exposure can provide diversification benefits but may also result in lower concentration in the tech sector.

Risk and Rebalancing

SCHG's strategy of reconstituting annually and quarterly rebalancing helps to minimize exposure to weaker companies and sectors SCHG: This Pure Growth Fund Is Better Positioned Now^[1]. This approach can reduce risk but may also result in lower performance during periods of market volatility.

QQQ, being a broader-based index fund, does not have the same level of active management. Its performance is more closely tied to the overall performance of the Nasdaq-100.

Conclusion

Both SCHG and QQQ offer strong exposure to growth, but they differ in their strategies and holdings. SCHG's concentration in large-cap tech and its active management strategy make it a strong choice for investors seeking high growth potential. However, QQQ's broader exposure and lower concentration in tech may provide better diversification benefits.

Ultimately, the choice between SCHG and QQQ depends on an investor's risk tolerance, investment goals, and market outlook. For investors seeking high growth potential with a focus on large-cap tech, SCHG may be the better choice. For those looking for broader exposure to growth with a lower concentration in tech, QQQ could be more suitable.

References

SCHG: This Pure Growth Fund Is Better Positioned Now^[1] https://seekingalpha.com/article/4822953-schg-this-pure-growth-fund-is-better-positioned-now