This Low-Cost, Growth-Focused Is Still A Buy
"A Simple, But Effective Growth ETF For Long-Term Investors"
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Current Price: $34.67
As an income-focused investor, the Technology (XLK) sector isn’t typically where I spend most of my time. That’s not because I dislike the businesses—quite the opposite. The challenge is that many of the market’s highest-growth technology companies offer little in the way of dividend income.
That said, ignoring growth entirely can be a mistake.
With artificial intelligence rapidly reshaping the global economy, I believe investors should maintain at least some exposure to the companies leading this transformation. One of my favorite ways to do that is through the Schwab U.S. Large-Cap Growth ETF (SCHG).
Its combination of low costs, tax efficiency, and exposure to some of the strongest growth businesses in the world makes it an attractive long-term holding for investors looking to participate in the AI-driven growth story.
While SCHG recently reached new highs and could experience periods of volatility, I continue to view it as one of the best core growth ETFs available today.
A Quick Look Back 📕
I last covered SCHG in January.
At the time, I highlighted the ETF’s heavy technology exposure, ultra-low expense ratio, and long-term track record as key reasons for my bullish outlook. My primary concern was valuation, as the fund was trading at an elevated multiple after a strong rally.
Despite those concerns, I suggested investors use any weakness as an opportunity to build positions.
Since then, SCHG has continued to perform well, generating returns that have largely kept pace with the broader market while maintaining its position as one of the most attractive growth-focused ETFs available.
What’s Driving Performance? 📊
SCHG currently sits just below its 52-week high after benefiting from the continued rally in artificial intelligence and technology stocks.
The ETF’s performance has been powered by several of the market’s largest AI beneficiaries, particularly NVIDIA (NVDA).
NVIDIA remains SCHG’s largest holding, accounting for more than 11% of assets. The company recently reported another blockbuster quarter, delivering 85% revenue growth and 140% EPS growth year-over-year. Free cash flow also surged, reinforcing NVIDIA’s dominant position within the AI infrastructure market.
Apple (AAPL) and Microsoft (MSFT) round out SCHG’s three largest holdings, and together these companies represent a significant portion of the fund’s portfolio. Other major positions include Amazon (AMZN), Alphabet (GOOG), Meta Platforms (META), Broadcom (AVGO), and Tesla (TSLA).
As a result, technology represents roughly 45% of the portfolio, giving investors meaningful exposure to many of the companies driving innovation and AI adoption.
While that concentration may create periods of volatility, it’s also one of the primary reasons SCHG has historically outperformed broader market indexes.
Why Investors Like SCHG 🤖
One of SCHG’s biggest advantages is its simplicity.
The ETF tracks the U.S. Large-Cap Growth Total Stock Market Index and currently holds nearly 200 companies. The fund is passively managed and rebalances quarterly, helping maintain exposure to businesses exhibiting strong growth characteristics.
Most importantly, SCHG charges an expense ratio of just 0.04%.
That means investors keep more of their returns rather than paying management fees.
For comparison, many actively managed growth funds charge ten to twenty times as much.
This combination of diversification, low costs, and exposure to elite growth businesses has helped SCHG become a favorite among long-term investors.
Long-Term Results Continue To Impress 📉
While several growth ETFs have outperformed SCHG over shorter periods, the fund’s long-term track record remains exceptional.
Over the last five years, SCHG has outperformed the S&P 500 (SP500) as measured by Vanguard S&P 500 ETF (VOO).
Looking back a full decade, the gap becomes even more impressive, with SCHG delivering substantially higher cumulative returns than the broader market.
The primary reason is simple: growth companies have generated superior earnings growth, and SCHG has consistently maintained significant exposure to those businesses.
Investors looking for even more concentrated technology exposure may prefer funds like Invesco QQQ Trust, Series 1 (QQQ), Vanguard Information Technology ETF (VGT), or Vanguard Mega Cap Growth ETF (MGK).
However, SCHG offers a compelling middle ground by providing broad diversification while still maintaining meaningful exposure to the market’s fastest-growing companies.
Why The AI Tailwind Matters 💨
Looking ahead, I believe artificial intelligence remains one of the most important secular growth trends for investors.
Industry forecasts suggest the AI market could grow at a compound annual growth rate of roughly 30% over the next decade, potentially becoming a multi-trillion-dollar industry.
SCHG is well-positioned to benefit from that trend.
Its largest holdings are among the companies investing the most aggressively in AI infrastructure, cloud computing, software, semiconductors, and data centers.
NVIDIA continues to dominate AI hardware. Microsoft is embedding AI across its software ecosystem and cloud platform. Apple is gradually integrating AI features throughout its product lineup while maintaining one of the world’s most powerful consumer ecosystems.
Analysts currently expect strong long-term earnings growth from all three companies, and if AI adoption continues accelerating, those projections may ultimately prove conservative.
As these businesses grow, SCHG should naturally participate in that growth through its portfolio construction.
Risks To Consider ⚠️
Despite my bullish outlook, SCHG is not without risks.
The ETF’s heavy technology exposure means performance can be heavily influenced by investor sentiment toward AI and growth stocks.
Any slowdown in AI spending, economic weakness, or valuation compression across large-cap technology companies could create meaningful short-term volatility.
Investors should also recognize that SCHG is currently trading near all-time highs. While I don’t believe that changes the long-term investment thesis, it could increase the likelihood of pullbacks along the way.
For that reason, investors may want to build positions gradually rather than attempting to perfectly time an entry point.
Bottom Line ✅
SCHG remains one of my favorite growth-focused ETFs.
Its 0.04% expense ratio, diversified portfolio of industry-leading businesses, tax-efficient structure, and significant exposure to artificial intelligence make it an attractive long-term holding.
While periods of volatility are inevitable, I believe the companies driving SCHG’s performance are positioned to benefit from some of the most powerful growth trends of the next decade.
For investors seeking a simple, low-cost way to gain exposure to the AI revolution and long-term market growth, SCHG remains a Buy.
Do you continue to add to your ETFs during times of high performance? Let me know in the comments.
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Not financial advice. For educational purposes only. I am not a licensed professional. Do your own due diligence.
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