SCHG vs. VUG: A Simple Guide to Choosing Your Growth ETF

The decision between SCHG and VUG isn't just about picking two similar funds. It's about choosing your preferred flavor of a powerful market trend that is already in motion. Right now, growth stocks are leading the charge, and that sets the stage for your portfolio.

Last year was a clear victory for growth. While the broad S&P 500 index gained 17%, the S&P 500 Growth index soared 21%. This gap shows that the market is rewarding companies with faster momentum and sales growth, particularly in technology. That trend is expected to continue. Goldman Sachs projects the S&P 500 itself will rally 12% this year, and a market that's moving higher often lifts its fastest-growing segments even more.

Given this setup, both SCHG and VUG offer a simple, low-cost way to ride this wave. They are both passively managed ETFs that track large-cap growth indexes, and they charge the same rock-bottom 0.04% expense ratio. You're not paying a premium for the growth bet itself. The choice is about the specific mix of stocks within that bet.

The bottom line is that you're not choosing between growth and value here. You're choosing between two high-quality, low-cost vehicles for the same core growth theme. The performance gap between them last year was already there, and it will likely persist as each fund's unique portfolio of holdings responds differently to market swings. So, the real question is: which portfolio structure aligns better with your view of which growth stocks will lead in the year ahead?

The Core Trade-Off: Size vs. Recent Performance

The real choice between these two funds comes down to a simple, tangible trade-off: you can have a much larger, more established vehicle with slightly better recent returns, or you can opt for a smaller, more diversified fund. Both charge the same rock-bottom 0.04% expense ratio, so cost is a wash. The difference is in scale and recent results.

Vanguard's VUG is a behemoth, with $352 billion in assets. That massive size gives it immense staying power and liquidity. In return, it has delivered slightly stronger performance, returning 20.19% over the past year compared to 17.88% for Schwab's SCHG. For an investor, that's a clear performance edge over the last 12 months.

But SCHG offers a different kind of stability. It's a smaller fund, managing $53 billion. That size can translate into a more diversified portfolio. While both are heavy on tech, SCHG holds 198 stocks versus VUG's 160, and its top holdings make up a smaller portion of the total. This broader base can sometimes act as a buffer during market swings.

So the trade-off is clear. If you value a proven track record and the sheer weight of a giant fund, VUG's recent outperformance and massive scale are compelling. If you prefer a slightly more diversified basket of growth stocks and are willing to accept a bit less recent juice, SCHG provides that option. Both are low-cost, but one is simply a much bigger piece of the market.

Digging Deeper: What's in the Basket?

The true difference between these two funds isn't in their fees or their broad growth mandate. It's in the specific rules that build their portfolios and the resulting mix of stocks. These rules create distinct risk and return profiles that matter over time.

Both funds have a heavy tilt toward technology, which is the engine of modern growth. But the details of their indexes shape the journey. SCHG's index includes more small-cap growth stocks, adding a bit more volatility to the mix. In practice, this means its portfolio holds 198 companies compared to VUG's 160. That broader base can offer a bit more diversification within the growth universe, potentially cushioning the fund if a few large tech names stumble.

VUG, by contrast, has a slightly narrower focus. Its index gives it a heavier tilt toward tech, with 51% of its assets in technology versus 45% for SCHG. This concentration, combined with its massive size, gives it a marginally lower volatility profile. Its 5-year beta of 1.21 is actually a bit lower than SCHG's 1.17. That's a subtle but important point: while both are volatile growth funds, VUG's larger, more concentrated index tends to swing less wildly than SCHG's broader, slightly more volatile basket.

The bottom line is that SCHG trades a bit of recent performance for a potentially more stable, diversified ride. Its smaller top holdings and more companies mean less single-stock risk. VUG offers a more focused bet on the biggest tech names, which drove its stronger recent returns but also comes with a slightly higher sensitivity to tech sector swings. For an investor, this is the core trade-off: a wider, potentially steadier path versus a more direct, concentrated one.

The Bottom Line: Which Fits Your Portfolio?

After weighing the scale, the recent returns, and the makeup of the baskets, the choice between SCHG and VUG comes down to two simple questions: How much size do you value, and how much volatility can you stomach? Both are excellent, low-cost pieces for a growth portfolio, but they fit different needs.

For the investor who prioritizes sheer size and liquidity, VUG is the clear winner. With $352 billion in assets, it's the largest growth fund in the world. That scale offers a powerful advantage: it's the most liquid, meaning you can buy or sell large blocks without moving the price. For a buy-and-hold investor building a core holding, this giant's staying power and deep market presence are a compelling reason to choose it. It's the established, heavyweight option.

On the flip side, if you're looking for a slight edge in recent performance and a touch more diversification, SCHG is a solid choice. It returned 17.88% over the past year, which is strong, and its portfolio holds 198 companies versus VUG's 160. That broader base, with a slightly smaller concentration in the top holdings, can provide a marginally steadier ride. It's the fund that trades a bit of recent juice for a potentially more stable, diversified basket of growth stocks.

The bottom line is that you're not choosing between growth and value, or between high cost and low cost. Both funds charge the same 0.04% expense ratio and aim for the same large-cap growth segment. The decision hinges entirely on your preference for size and your tolerance for minor volatility differences. VUG offers a more concentrated, tech-heavy bet on the giants. SCHG provides a slightly wider, more diversified path. Choose the vehicle that best matches your view of the market's next leg.