Latest news with #VanguardS&P500ETF
Yahoo
3 days ago
- Business
- Yahoo
Is the Vanguard Value ETF the Simplest Way to Consistently Collect More Passive Income Than the S&P 500?
Key Points The Vanguard Value ETF has a much lower valuation than the Vanguard S&P 500 ETF. The Value ETF is a wealth compounder first and a passive income tool second. The ETF can be an effective tool for investors who don't want to amplify their exposure to mega-cap growth stocks. 10 stocks we like better than Vanguard Index Funds - Vanguard Value ETF › The S&P 500 (SNPINDEX: ^GSPC) has historically been a fantastic way to compound wealth -- generating annualized total returns of 9% to 10%. The proliferation of low-cost index funds and exchange-traded funds (ETFs) has made it easier than ever to invest in the S&P 500 without racking up high fees. The Vanguard S&P 500 ETF (NYSEMKT: VOO) -- one of the largest S&P 500 index funds by net assets -- has an expense ratio of just 0.03% -- or 3 cents for every $100 invested. When I first began investing, it was normal to see flat fees per stock trade of around $5 to $10. So fees and expense ratios are no longer a major drag on returns for investors who regularly pour their savings into equities. One issue with buying the S&P 500 is that it doesn't have a high yield. Today's top S&P 500 companies are growth stocks that have yields well below 1% or don't pay dividends at all -- a stark contrast to the days when the most valuable companies were oil and gas giants, industrials, or consumer staples behemoths with high yields. As a result, the yield of the S&P 500 has fallen to just 1.2%. What's more, the valuation of the S&P 500 has gotten more expensive as stock prices have outpaced earnings growth. Here's why investors looking to use passive income as a key way to achieve their financial goals may want to consider buying the Vanguard Value ETF (NYSEMKT: VTV) over the Vanguard S&P 500 ETF. A lower yield at a better valuation The Vanguard Value ETF sports an expense ratio of 0.04%, so it has just one cent more in annual fees per $100 invested than the Vanguard S&P 500 ETF. It also offers a full percentage point higher in 30-day SEC yield at 2.2% compared to 1.2% for the S&P 500 ETF. In addition to having a higher yield, the Value ETF sports a 19.6 price-to-earnings (P/E) ratio (as of June 30) and holds 335 stocks compared to a 27.2 P/E ratio (also as of June 30) and 505 holdings for the S&P 500 ETF. The Value ETF's higher yield and significantly lower valuation may appeal to investors looking to avoid paying a premium for the top stocks that are leading the S&P 500. A different cast of characters The Value ETF's higher yield and lower valuation result from its composition. Vanguard Value ETF Vanguard S&P 500 ETF Holding Rank Company Weighting Company Weighting 1 Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) 4% Nvidia (NASDAQ: NVDA) 7.3% 2 JPMorgan Chase (NYSE: JPM) 3.6% Microsoft (NASDAQ: MSFT) 7% 3 ExxonMobil (NYSE: XOM) 2.1% Apple (NASDAQ: AAPL) 5.8% 4 Walmart (NYSE: WMT) 2% Amazon (NASDAQ: AMZN) 3.9% 5 Procter & Gamble (NYSE: PG) 1.7% Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) 3.5% 6 Oracle (NYSE: ORCL) 1.7% Meta Platforms (NASDAQ: META) 3.1% 7 Johnson & Johnson (NYSE: JNJ) 1.7% Broadcom (NASDAQ: AVGO) 2.5% 8 Home Depot (NYSE: HD) 1.7% Berkshire Hathaway 1.7% 9 AbbVie (NYSE: ABBV) 1.5% Tesla (NASDAQ: TSLA) 1.7% 10 Bank of America (NYSE: BAC) 1.4% JPMorgan Chase 1.5% Total 23.1% Total 38% Data source: Vanguard. Aside from Berkshire Hathaway and JPMorgan Chase, there are no other companies that overlap the top 10 holdings in the Value ETF and S&P 500 ETF. You'll also notice that the S&P 500 is much more top-heavy -- meaning that just a handful of names can move the index. Whereas the Value ETF is more balanced and not as dominated by just 10 companies. Far more than a passive income vehicle Over the last decade, the Value ETF has gone up 111.5% and has a total return of 173.5%. Meaning that capital gains have made up a much higher percentage of the total return than dividend income. The investment thesis centers around the companies it holds rather than being all about yield, a stark contrast to ETFs that prioritize passive income over upside potential. The JP Morgan Nasdaq Equity Premium ETF (NASDAQ: JEPQ) sells covered call options on the Nasdaq-100 as a way to generate income -- which provides a sizable stream of monthly payouts while capping the upside potential of the Nasdaq-100 moving higher. The fund sports an 11.2% 30-day SEC yield (as of June 30), so it could be a great way for investors who are primarily focused on passive income. However, the Value ETF offers a way to get a higher yield than the S&P 500 without having any cap on upside potential. The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) doesn't use call options to achieve its high 3.9% yield. But many of its holdings are arguably lesser quality companies than what you'll find in the Value ETF. The Vanguard Value ETF remains a top fund to buy now The Value ETF is a good buy if you already own many of the top growth stocks in the S&P 500 and are looking to diversify your portfolio into different companies and boost your passive income. It's also a good option for investors who want to participate in the broader market and collect more passive income than the S&P 500. While there are plenty of ETFs that offer higher yields than the Value ETF, I would argue that the quality of companies in the ETF makes it one of the best ways to consistently collect more passive income than the index. Should you buy stock in Vanguard Index Funds - Vanguard Value ETF right now? Before you buy stock in Vanguard Index Funds - Vanguard Value ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Vanguard Index Funds - Vanguard Value ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $636,563!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,108,033!* Now, it's worth noting Stock Advisor's total average return is 1,047% — a market-crushing outperformance compared to 181% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 4, 2025 Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Daniel Foelber has positions in Nvidia and Procter & Gamble. The Motley Fool has positions in and recommends AbbVie, Alphabet, Amazon, Apple, Berkshire Hathaway, Home Depot, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, Oracle, Tesla, Vanguard Index Funds-Vanguard Value ETF, Vanguard S&P 500 ETF, and Walmart. The Motley Fool recommends Broadcom and Johnson & Johnson and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. Is the Vanguard Value ETF the Simplest Way to Consistently Collect More Passive Income Than the S&P 500? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Globe and Mail
3 days ago
- Business
- Globe and Mail
Is the Vanguard Value ETF the Simplest Way to Consistently Collect More Passive Income Than the S&P 500?
Key Points The Vanguard Value ETF has a much lower valuation than the Vanguard S&P 500 ETF. The Value ETF is a wealth compounder first and a passive income tool second. The ETF can be an effective tool for investors who don't want to amplify their exposure to mega-cap growth stocks. 10 stocks we like better than Vanguard Index Funds - Vanguard Value ETF › The S&P 500 (SNPINDEX: ^GSPC) has historically been a fantastic way to compound wealth -- generating annualized total returns of 9% to 10%. The proliferation of low-cost index funds and exchange-traded funds (ETFs) has made it easier than ever to invest in the S&P 500 without racking up high fees. The Vanguard S&P 500 ETF (NYSEMKT: VOO) -- one of the largest S&P 500 index funds by net assets -- has an expense ratio of just 0.03% -- or 3 cents for every $100 invested. When I first began investing, it was normal to see flat fees per stock trade of around $5 to $10. So fees and expense ratios are no longer a major drag on returns for investors who regularly pour their savings into equities. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » One issue with buying the S&P 500 is that it doesn't have a high yield. Today's top S&P 500 companies are growth stocks that have yields well below 1% or don't pay dividends at all -- a stark contrast to the days when the most valuable companies were oil and gas giants, industrials, or consumer staples behemoths with high yields. As a result, the yield of the S&P 500 has fallen to just 1.2%. What's more, the valuation of the S&P 500 has gotten more expensive as stock prices have outpaced earnings growth. Here's why investors looking to use passive income as a key way to achieve their financial goals may want to consider buying the Vanguard Value ETF (NYSEMKT: VTV) over the Vanguard S&P 500 ETF. A lower yield at a better valuation The Vanguard Value ETF sports an expense ratio of 0.04%, so it has just one cent more in annual fees per $100 invested than the Vanguard S&P 500 ETF. It also offers a full percentage point higher in 30-day SEC yield at 2.2% compared to 1.2% for the S&P 500 ETF. In addition to having a higher yield, the Value ETF sports a 19.6 price-to-earnings (P/E) ratio (as of June 30) and holds 335 stocks compared to a 27.2 P/E ratio (also as of June 30) and 505 holdings for the S&P 500 ETF. The Value ETF's higher yield and significantly lower valuation may appeal to investors looking to avoid paying a premium for the top stocks that are leading the S&P 500. A different cast of characters The Value ETF's higher yield and lower valuation result from its composition. Data source: Vanguard. Aside from Berkshire Hathaway and JPMorgan Chase, there are no other companies that overlap the top 10 holdings in the Value ETF and S&P 500 ETF. You'll also notice that the S&P 500 is much more top-heavy -- meaning that just a handful of names can move the index. Whereas the Value ETF is more balanced and not as dominated by just 10 companies. Far more than a passive income vehicle Over the last decade, the Value ETF has gone up 111.5% and has a total return of 173.5%. Meaning that capital gains have made up a much higher percentage of the total return than dividend income. The investment thesis centers around the companies it holds rather than being all about yield, a stark contrast to ETFs that prioritize passive income over upside potential. The JP Morgan Nasdaq Equity Premium ETF (NASDAQ: JEPQ) sells covered call options on the Nasdaq-100 as a way to generate income -- which provides a sizable stream of monthly payouts while capping the upside potential of the Nasdaq-100 moving higher. The fund sports an 11.2% 30-day SEC yield (as of June 30), so it could be a great way for investors who are primarily focused on passive income. However, the Value ETF offers a way to get a higher yield than the S&P 500 without having any cap on upside potential. The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) doesn't use call options to achieve its high 3.9% yield. But many of its holdings are arguably lesser quality companies than what you'll find in the Value ETF. The Vanguard Value ETF remains a top fund to buy now The Value ETF is a good buy if you already own many of the top growth stocks in the S&P 500 and are looking to diversify your portfolio into different companies and boost your passive income. It's also a good option for investors who want to participate in the broader market and collect more passive income than the S&P 500. While there are plenty of ETFs that offer higher yields than the Value ETF, I would argue that the quality of companies in the ETF makes it one of the best ways to consistently collect more passive income than the index. Should you invest $1,000 in Vanguard Index Funds - Vanguard Value ETF right now? Before you buy stock in Vanguard Index Funds - Vanguard Value ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard Index Funds - Vanguard Value ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $636,563!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,108,033!* Now, it's worth noting Stock Advisor's total average return is 1,047% — a market-crushing outperformance compared to 181% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 4, 2025 Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Daniel Foelber has positions in Nvidia and Procter & Gamble. The Motley Fool has positions in and recommends AbbVie, Alphabet, Amazon, Apple, Berkshire Hathaway, Home Depot, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, Oracle, Tesla, Vanguard Index Funds-Vanguard Value ETF, Vanguard S&P 500 ETF, and Walmart. The Motley Fool recommends Broadcom and Johnson & Johnson and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Yahoo
31-07-2025
- Business
- Yahoo
Is the Vanguard Growth ETF the Simplest Way to Consistently Beat the S&P 500?
Key Points Investing in top growth stocks has been an effective way to outperform the S&P 500 over time. Many top growth stocks have clear paths toward higher earnings, which can justify expensive valuations. By betting big on a handful of sectors and individual companies, the Vanguard Growth ETF can be volatile and prone to sell-offs. 10 stocks we like better than Vanguard Index Funds - Vanguard Growth ETF › Beating the S&P 500 (SNPINDEX: ^GSPC) over an extended period of time is no easy task. Just 8% of active large-cap U.S. equity stock funds outperformed the index over the last 20 years. One of the most effective ways to beat the index is to have a few winners that do really well. Buying a stock like Amazon 20 years ago would have produced monster returns, allowing investors to take an otherwise mediocre portfolio and transform it into an elite one. Having outsized positions in large-cap growth stocks has been the secret sauce for beating the S&P 500 over the last decade, which is exactly what the Vanguard Growth ETF (NYSEMKT: VUG) aims to do. Here's why the exchange-traded fund (ETF) could continue to do well over the long term. The Growth ETF gains are driven by just three stock market sectors The Vanguard Growth ETF has a 0.04% expense ratio compared to 0.03% for the Vanguard S&P 500 ETF (NYSEMKT: VOO), which is just a $1 difference for every $10,000 invested. So there's essentially a negligible cost to choose the Growth ETF over the S&P 500 ETF. As you can see in the following table, the Growth ETF has crushed the S&P 500 over the last decade -- largely thanks to outperformance periods in 2017, 2020, 2023, and 2024. 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 YTD Vanguard Growth ETF 3.3% 6.3% 27.7% (3.3%) 37% 40.2% 27.3% (33.2%) 46.8% 32.7% 10.5% Vanguard S&P 500 ETF 1.3% 12.2% 21.8% (4.5%) 31.4% 18.3% 28.8% (18.2%) 26.3% 25% 9% Data source: YCharts. YTD = year to date. You'll notice that the Growth ETF fell much more than the S&P 500 in 2022, but that decline was more than made up for with outsized gains in many other years. Even when factoring in the S&P 500's higher dividend yield, the total return for the Vanguard Growth ETF is up 353.4% over the decade compared to 264.2% for the Vanguard S&P 500 ETF -- which is the difference between turning $10,000 into $45,240 versus $36,420 with no extra effort. If the technology, communications, and consumer discretionary sectors continue to outperform the S&P 500, so will the Growth ETF. The Growth ETF has a combined weighting in these sectors of 80.1% compared to 53.3% for the S&P 500. So while the S&P 500 has become more concentrated in these sectors, the Growth ETF takes it to a whole new level by being drastically underweight in financials, healthcare, energy, consumer staples, materials, real estate, and utilities. Both sectors have roughly equal exposure to industrials -- which is cyclical and somewhat of a blend between growth, income, and value. Reinvesting excess profits rather than distributing them can accelerate earnings growth The Vanguard Growth ETF is betting big on just a handful of names, with roughly two-thirds of the fund concentrated in just 15 companies -- Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta Platforms, Broadcom, Tesla, Eli Lilly, Visa, Mastercard, Netflix, Costco Wholesale, and Palantir Technologies. These companies have contributed a disproportionate amount of gains to the S&P 500 compared to the average S&P 500 holding. And since the Growth ETF is overweight in these names compared to the index, it has benefited even more from their outperformance. The valuations of many of these companies are significantly higher than they used to be, which may lead some investors to wonder how much longer their outperformance can last before they revert to the mean. While it's easy to look at the price action of these companies and say they are overvalued, a better question is to ask what is stopping these companies from continuing to beat the market? Or even more specifically, what's holding these companies back from growing earnings at an above-average rate, therefore justifying higher stock prices? At their core, what separates growth stocks from value stocks is capital allocation. A stodgy, mature business like Coca-Cola will sometimes acquire new drinks or invest in organic growth. But the opportunities are limited. So management prioritizes returning excess profits to shareholders through dividends, and to a lesser extent, stock repurchases, whereas many top growth stocks have compelling opportunities in artificial intelligence, cloud computing, robotics, e-commerce, media, networking, electronics, and more. These end markets have been lucrative for companies that can allocate capital effectively and innovate. Amazon is famous for taking cash flow and plowing it back into growth initiatives. Amazon's track record is riddled with failures, but also major successes -- such as becoming the market leader in cloud computing and continuing to expand its e-commerce empire. By investing in ideas and maintaining a strong balance sheet, Amazon can afford to take risks and ride out downturns. Investors aren't always happy with this risk-taking, as Amazon fell 25% or more from its all-time high three times in the last 10 years (February 2016, December 2018, and over 55% in December 2022). In sum, the price for outsized gains is often high volatility, which can work in favor of risk-tolerant investors with long-term time horizons. The Growth ETF remains a top buy now There's no guarantee that the Vanguard Growth ETF will continue to outperform the S&P 500, but it has been one of the simplest ways to beat the index. The outperformance hasn't been a fluke, as the index bets big on leading companies that pour resources into growing their future earnings rather than directly returning capital to shareholders. That strategy should continue to produce solid gains over the long term, but investors may want to temper their expectations in the near term, given elevated valuations. I expect the Vanguard Growth ETF to outperform the S&P 500 ETF over the next decade, making it a more attractive option for long-term investors. However, the Growth ETF could easily underperform the S&P 500 over the short term, so it's only worth approaching the fund if you have the time horizon needed to endure volatility. Should you buy stock in Vanguard Index Funds - Vanguard Growth ETF right now? Before you buy stock in Vanguard Index Funds - Vanguard Growth ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Vanguard Index Funds - Vanguard Growth ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $630,291!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,075,791!* Now, it's worth noting Stock Advisor's total average return is 1,039% — a market-crushing outperformance compared to 182% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 29, 2025 Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Mastercard, Meta Platforms, Microsoft, Netflix, Nvidia, Palantir Technologies, Tesla, Vanguard Index Funds-Vanguard Growth ETF, Vanguard S&P 500 ETF, and Visa. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. Is the Vanguard Growth ETF the Simplest Way to Consistently Beat the S&P 500? was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
30-07-2025
- Business
- Yahoo
Got $200 per Month? This Warren Buffett-Approved ETF Could Turn It Into $1 Million or More.
Key Points ETFs are a smart investment for building wealth over time. Warren Buffett's best suggestion for most people is simpler than you might think. With enough time and consistency, you could potentially earn $1 million or more. 10 stocks we like better than S&P 500 Index › Investing in exchange-traded funds (ETFs) is a fantastic way to generate wealth. ETFs require a fraction of the time and research involved in buying individual stocks, yet with the right strategy, they could make you a millionaire. Each ETF has unique strengths and weaknesses, but there's one fund in particular that has gained the approval of famed investor Warren Buffett. In Buffett's own words, this ETF is "the best thing" for most investors. Here's how $200 per month could transform into $1 million or more. A safe yet powerful investment If you're looking for an investment that can protect your savings while still growing exponential wealth, the S&P 500 ETF may be a fantastic addition to your portfolio. An S&P 500 ETF tracks the S&P 500 index (SNPINDEX: ^GSPC). While there are many S&P 500 ETFs to choose from -- such as the Vanguard S&P 500 ETF (NYSEMKT: VOO) or iShares Core S&P 500 ETF (NYSEMKT: IVV) -- they all include stocks from the 500 companies within the index itself. In Berkshire Hathaway's 2020 annual meeting, Warren Buffett explained that while investors have many options, "for most people, the best thing to do is to own the S&P 500 index fund." There's good reason behind that claim, as this ETF provides a slew of advantages: Immediate diversification: The S&P 500 contains stocks from 500 of the largest and strongest companies in the U.S. across all sectors of the market. That level of diversification can better protect against risk, because if a few stocks or even an entire industry takes a hit, it won't sink your entire portfolio. A flawless track record of success: Historically, there's never been a downturn from which the S&P 500 hasn't recovered. In fact, in a study from Crestmont Research, there's never even been a single 20-year period throughout the index's history in which it hasn't earned positive total returns. In other words, if you'd invested in an S&P 500 ETF at any point and held it for 20 years, you'd have made money. Minimal effort required on your part: An S&P 500 ETF is a fantastic all-in-one investment for many people. Because it's so diversified and performs best when left for decades to grow, you don't need to do much to maintain it. You never need to research individual stocks or decide when to buy or sell, which can be an appealing perk for those looking for a "set it and forget it" type of investment. Despite the fact that the S&P 500 ETF is one of the safest investments out there, it can still pack a punch when it comes to earnings. With enough time and consistency, you could earn well over $1 million with this type of investment. Transforming $200 per month into $1 million Of course, nobody can say for certain how the S&P 500 will perform in the future. Historically, though, the index has earned a compound annual growth rate of around 10% per year. While you very likely won't see 10% returns every single year, your annual returns will generally average out to around 10% per year over decades. Let's say you're investing in an S&P 500 ETF and earning a 10% average annual rate of return. Depending on how many years you have to let your money grow, here's approximately what you'd need to invest each month to reach $1 million in total savings: Number of Years Amount Invested per Month Total Portfolio Value 20 $1,500 $1.031 million 25 $850 $1.003 million 30 $525 $1.036 million 35 $325 $1.057 million 40 $200 $1.062 million Data source: Author's calculations via The more time you have to invest, the less you'll need to contribute each month to reach millionaire status. No matter how much you can afford to save each month, it's wise to get started as soon as possible to take full advantage of this valuable time. Building a million-dollar portfolio isn't easy, but it's simpler and more straightforward than it might seem. If you're looking for a hands-off investment that can help you generate wealth while barely lifting a finger, the S&P 500 ETF might be a fantastic match. Should you buy stock in S&P 500 Index right now? Before you buy stock in S&P 500 Index, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and S&P 500 Index wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $630,291!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,075,791!* Now, it's worth noting Stock Advisor's total average return is 1,039% — a market-crushing outperformance compared to 182% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 29, 2025 Katie Brockman has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Berkshire Hathaway and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy. Got $200 per Month? This Warren Buffett-Approved ETF Could Turn It Into $1 Million or More. was originally published by The Motley Fool
Business Insider
30-07-2025
- Business
- Business Insider
Charles Schwab ETF (SCHG) Flaunts Top-Tier Growth Stock Package
If you're looking for a long-term core holding to anchor your portfolio, the Schwab U.S. Large-Cap Growth ETF (SCHG) is a compelling choice—and so is its sponsor, Charles Schwab Corporation (SCHW). SCHG, managed by Schwab Asset Management, oversees approximately $46 billion in non-discretionary assets (in addition to $1.3 trillion in discretionary assets) and offers diversified exposure to leading growth stocks tied to some of the market's most durable long-term themes. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Its strong performance track record and ultra-low expense ratio make it particularly attractive for cost-conscious investors aiming to maximize long-term returns. At the same time, Charles Schwab Corporation, the parent company behind the fund, presents its own investment appeal as a major player in brokerage, banking, and asset management. Comparing SCHG with Vanguard Any serious discussion about what makes SCHG a compelling investment must start with its standout performance history. It's a well-known investing truth that few funds—whether ETFs, mutual funds, or even hedge funds—consistently outperform the market over time. SCHG is one of the rare exceptions, and it has been doing so for years. As of the most recent monthly close, SCHG delivered an impressive annualized return of 26.9% over the past three years. In comparison, the Vanguard S&P 500 ETF (VOO), which tracks the broader market via the S&P 500 (SPX), returned 19.6% annualized over the same period —strong in its own right, but trailing SCHG by a full seven percentage points annually. Looking further back, SCHG has continued to outperform. Over the past five years, it posted an 18.7% annualized return, outpacing VOO's 16.6%. And over the past decade, SCHG returned 16.7% annually, compared to VOO's 13.6%. Investing in a fund that delivers consistent double-digit annualized returns is a powerful way to grow portfolio value over time. To illustrate, a $10,000 investment in SCHG 10 years ago would be worth $45,645 today. While it's true that past performance doesn't guarantee future results, SCHG's long-term track record of outperformance positions it as a fund investors can reasonably count on to continue delivering strong results over time. SCHG's Miniscule Expense Ratio Not only has SCHG helped investors build wealth over time, but it also helps them preserve it with a negligible expense ratio of just 0.04%. This means that an investor putting $10,000 into the fund will pay just $4 in fees annually. Assuming that SCHG maintains this expense ratio and returns 5% per year going forward, the investor putting $10,000 into SCHG will pay just $34 in fees over the next 10 years. It's worth noting that this makes SCHG significantly cheaper than one of the other most popular tech- and growth-oriented ETFs, the Invesco QQQ Trust (QQQ), which charges a comparatively higher expense ratio of 0.20%. Exposure to Top Growth Stocks Importantly, SCHG's portfolio is where the rubber hits the road for investors. As a passively managed index fund, it offers solid diversification across 228 holdings, tracking the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. That said, the fund is somewhat top-heavy—its top 10 holdings make up 58.5% of total assets. Nvidia (NVDA) leads the pack with a 12.3% weighting, followed closely by Microsoft (MSFT) at 11.0%, both reflecting their dominant roles in the current growth landscape. Below is a snapshot of SCHG's top 10 holdings, as sourced from TipRanks' holdings tool. As you can see, SCHG's top 10 holdings are a veritable who's who list of the top tech and growth stocks that have come to define the Tech market in recent years. In addition to the Magnificent Seven stocks, SCHG's top 10 holdings also include semiconductor giant Broadcom (AVGO), a key player in the AI revolution, and pharma megacap Eli Lilly (LLY), whose weight loss drugs have taken the healthcare sector by storm. Just outside of SCHG's top 10 holdings, other prominent positions include Visa (V), Mastercard (MA), Palantir (PLTR), Netflix (NFLX), and GE Aerospace (GE). What I find especially appealing about SCHG's portfolio is its dual advantage. On one hand, it offers immediate exposure to a roster of established market leaders with strong track records of outperformance. On the other hand, it positions investors to benefit from transformative, long-term growth themes. These include generative AI through companies like Nvidia, Microsoft, Broadcom, Meta Platforms (META), and Alphabet (GOOGL); autonomous vehicles via Tesla and Alphabet; robotics through Amazon (AMZN) and Tesla; and breakthroughs in biotech and weight-loss drugs through names like Eli Lilly (LLY). These are precisely the innovation-driven sectors that long-term investors should be targeting. One notable risk is SCHG's relatively high valuation—its holdings currently trade at a trailing 12-month price-to-earnings ratio of 36.8, well above the S&P 500's average of around 25. This is something investors should keep in mind. However, these are high-growth companies with strong earnings potential, which could make today's valuations appear more reasonable over time. For valuation-conscious investors like myself, strategies such as dollar-cost averaging or buying during market pullbacks can help mitigate this risk and build positions more prudently. SCHG is a Dividend Payer While it's not the fund's main calling card, SCHG is a dividend payer, albeit with a low dividend yield of just 0.38%. Still, the ETF has increased the size of its payout each of the past three years in a row, and I would expect it to continue to do so going forward as the stocks it holds increase their earnings over the years. Is SCHG a Good ETF to Buy? Turning to Wall Street, SCHG earns a Strong Buy consensus rating based on 201 Buys, 26 Holds, and one Sell rating assigned in the past three months. The average SCHG price target of $32.67 implies ~7.6% upside potential over the coming twelve months. Investor Takeaway While there's no shortage of ETFs on the market, few have consistently outperformed the broader indices over time, the way SCHG has. I'm bullish on SCHG due to its strong track record of long-term outperformance, ultra-low expense ratio, and high-quality portfolio of blue-chip growth stocks. These attributes make it a compelling choice for investors seeking a reliable, long-term core holding to anchor their portfolios for the long term.
