SCHG vs. QQQ: Growth Showdown
Schwab's Broad Growth Strategy vs. Nasdaq's Tech-Heavy Approach
When it comes to large-cap growth investing, two ETFs consistently capture investor attention: Schwab’s U.S. Large-Cap Growth ETF and the Invesco QQQ Trust. While both target growth-oriented companies, their approaches differ significantly—and these differences can meaningfully impact your portfolio’s performance and costs over time.
This comprehensive analysis reveals surprising insights about concentration, costs, and performance that may challenge common assumptions about these popular growth ETFs.
Table of Contents
The Cost Efficiency Battle
The most striking difference between SCHG and QQQ lies in their expense ratios—and the gap is substantial.
| Metric | SCHG | QQQ |
|---|---|---|
| Expense Ratio | 0.04% | 0.20% |
| Annual Cost on $10,000 | $4 | $20 |
| 10-Year Cost Impact | ~$40 | ~$200 |
SCHG’s expense ratio of 0.04% represents an 80% cost savings compared to QQQ’s 0.20% (ETF Database, ETF Database). For long-term investors, this difference compounds significantly. On a $100,000 investment, you’d save approximately $160 annually by choosing SCHG—money that stays invested and continues growing.
This cost advantage becomes even more pronounced over decades. The savings from SCHG’s lower fees can translate to thousands of additional dollars in your portfolio over a 20-30 year investment horizon.
Sector Diversification: Beyond Tech
While both ETFs focus on growth stocks, their sector exposures reveal important differences that affect diversification and risk.
Sector Allocation Comparison
| Sector | SCHG | QQQ |
|---|---|---|
| Technology | 60.28% | 64.11% |
| Financials | 7.08% | 0% |
| Healthcare | 6.63% | ~3% |
| Consumer Discretionary | ~15% | ~18% |
SCHG offers meaningfully broader sector exposure (Yahoo Finance, Yahoo Finance). Its inclusion of financial services companies like Visa (2.4% weighting) and Mastercard (1.8% weighting), plus healthcare giants like Eli Lilly (2.3% weighting), provides diversification benefits that QQQ simply cannot match due to its Nasdaq-100 structure.
This sector diversification can be particularly valuable during periods when technology underperforms relative to other growth sectors. While both ETFs remain growth-focused, SCHG’s broader approach may offer more stability during sector rotations.
Holdings and Concentration Analysis
Here’s where the analysis reveals a surprising insight that challenges conventional wisdom.
| Metric | SCHG | QQQ |
|---|---|---|
| Total Holdings | 229 | 101 |
| Top 10 Concentration | 54.31% | 49.01% |
| Apple Weighting | 10.51% | 8.86% |
| Microsoft Weighting | 9.70% | 8.15% |
| NVIDIA Weighting | 8.84% | 7.37% |
Despite having more than twice as many holdings, SCHG is actually more concentrated than QQQ. This counterintuitive finding stems from SCHG’s larger positions in mega-cap tech stocks. The fund’s dependence on Apple, Microsoft, and NVIDIA is even greater than QQQ’s, making it more sensitive to these companies’ performance.
Holdings Overlap
Analysis shows 52 common holdings between the two ETFs (ETF Research Center), representing:
- 25.1% of SCHG’s total holdings
- 51.5% of QQQ’s holdings
This significant overlap means both funds rise and fall with many of the same stocks, though their different weightings can lead to performance variations.
Performance Comparison
Recent performance data reveals an interesting trend that favors SCHG in the near term while acknowledging QQQ’s historical advantage.
| Time Period | SCHG Annualized Return | QQQ Annualized Return |
|---|---|---|
| 5-Year | 18.47% | 18.22% |
| 10-Year | 15.63% | 17.53% |
| 3-Year | 22.39% | 21.36% |
SCHG has matched or slightly outperformed QQQ in recent years (3-5 year periods), despite QQQ’s stronger 10-year track record. This recent performance parity is noteworthy given SCHG’s significant cost advantage—suggesting that after accounting for fees, SCHG may actually provide superior net returns.
Performance Factors
SCHG’s recent strong performance likely stems from:
- Diversification benefits during periods of tech volatility
- Financial sector exposure benefiting from rising interest rates
- Healthcare holdings providing defensive growth characteristics
- Lower fees improving net returns
Risk and Volatility Assessment
Both ETFs exhibit similar day-to-day volatility, but their risk profiles differ in important ways.
| Risk Metric | SCHG | QQQ |
|---|---|---|
| Daily Standard Deviation | ~25% | ~25% |
| Maximum Drawdown | -34.59% | -82.98% |
| Current Drawdown | -6.30% | -4.59% |
QQQ’s maximum drawdown of -82.98% reflects its exposure during the dot-com crash, while SCHG’s more modest -34.59% maximum drawdown occurred during its shorter history since 2009. While both funds carry similar current volatility, QQQ’s history suggests it may experience more extreme downturns during sector-specific crashes.
Community Insights and Investor Sentiment
Investment community discussions reveal nuanced preferences between these ETFs (Reddit):
Pro-SCHG Arguments
- Cost efficiency: “SCHG’s 0.04% expense ratio makes it a no-brainer for long-term growth investing”
- Diversification: “Having exposure to financials and healthcare provides better sector balance”
If someone doesn’t need passive income for at least 5 years, then $SCHG is the best option. It beats the market, consists of over 200 companies in different sectors. It also has companies in the NYSE and NASDAQ, instead of just the NASDAQ like $QQQ.
— Tyler Bailey (@TylerABailey) May 19, 2025
- Recent performance: “SCHG has slightly outperformed QQQ over the past 5 years despite the lower fees”
Pro-QQQ Arguments
- Established track record: “QQQ’s longer history and brand recognition provide confidence”
- Pure tech play: “When you want Nasdaq-100 exposure, QQQ is the original and best”
- Liquidity: “QQQ’s massive trading volume provides excellent liquidity for larger trades”
Balanced Perspectives
Many investors acknowledge both ETFs serve similar purposes, with some suggesting broader market ETFs like VOO for better overall diversification beyond growth stocks.
$SCHG is slept on as a growth ETF!
— Dave | Passive Income Pro (@Dave_CashFlow) May 21, 2025
That’s my substitute for $QQQ in our family investment account since you can’t buy fractional shares at Schwab
Which ETF Fits Your Strategy?
Choose SCHG If You:
- Prioritize cost efficiency and want to maximize long-term compound growth
- Seek broader sector diversification within growth investing
- Value recent performance trends showing SCHG keeping pace with QQQ
- Want exposure to growth beyond pure tech through financial and healthcare sectors
- Are building a long-term position where fee savings compound significantly
Choose QQQ If You:
- Want pure Nasdaq-100 exposure with its established methodology
- Prefer the ETF’s longer track record and historical outperformance
- Need high liquidity for frequent trading or large positions
- Believe in concentrated tech exposure over broader growth diversification
- Value brand recognition and familiarity in your investment choices
Portfolio Integration Strategies
For Core Growth Allocation: SCHG’s lower costs and broader diversification make it excellent for a core growth position in diversified portfolios.
For Satellite Tech Exposure: QQQ works well as a targeted technology allocation alongside broader market funds.
For Cost-Conscious Investors: SCHG’s expense ratio advantage becomes more pronounced with larger investment amounts and longer time horizons.
Conclusion
The SCHG vs. QQQ decision ultimately comes down to your priorities as an investor. SCHG offers compelling advantages through significantly lower costs, broader sector exposure, and recent performance that matches QQQ despite the fee handicap. These factors make it particularly attractive for long-term, cost-conscious investors seeking growth exposure beyond pure technology.
QQQ maintains appeal through its established track record, pure Nasdaq-100 focus, and superior long-term historical performance. For investors specifically seeking technology concentration or those who value the fund’s longer operational history, QQQ remains a solid choice.
However, the data suggests that SCHG’s combination of lower costs, broader diversification, and competitive recent performance makes it the more attractive option for most growth-focused investors. The 0.16% annual fee savings alone can translate to meaningful additional wealth over investment lifetimes, while the fund’s sector diversification may provide better risk-adjusted returns during various market cycles.
Both ETFs will likely continue serving investors well, but SCHG’s structural advantages position it as the more compelling choice for building long-term wealth through growth investing.
FAQ
Which is better, SCHG or QQQ? +
SCHG offers a lower expense ratio (0.04% vs 0.20%) and broader sector exposure including financials and healthcare, while QQQ focuses on the Nasdaq-100 with established reputation and stronger historical performance. SCHG may be better for cost-conscious investors seeking diversification beyond tech
Does SCHG have lower fees than QQQ? +
Yes, SCHG has a significantly lower expense ratio at 0.04% compared to QQQ's 0.20%. This 0.16% difference can lead to substantial cost savings over time, especially for long-term investors.
How does sector diversification differ between SCHG and QQQ? +
SCHG includes 229 holdings with exposure to financials (7.08%) and healthcare (6.63%), while QQQ has 101 holdings focused on tech and consumer sectors. SCHG offers broader diversification across sectors that QQQ excludes due to its Nasdaq-100 focus.
Which has better performance, SCHG or QQQ? +
Over the past 5 years, SCHG has delivered 18.47% annualized returns compared to QQQ's 18.22%. However, QQQ has outperformed over 10 years with 17.53% vs SCHG's 15.63%, likely due to QQQ's longer track record and tech-heavy exposure during favorable periods.
Is SCHG more concentrated than QQQ? +
Despite having more holdings (229 vs 101), SCHG actually has higher concentration in its top 10 holdings at 54.31% compared to QQQ's 49.01%. This is due to larger weightings in tech giants like Apple (10.51% vs 8.86%) and Microsoft (9.70% vs 8.15%).
What indexes do SCHG and QQQ track? +
SCHG tracks the Dow Jones U.S. Large-Cap Growth Total Stock Market Index, providing exposure to large-cap growth companies across various sectors. QQQ tracks the Nasdaq-100 Index, focusing on the 100 largest non-financial companies listed on Nasdaq.
Which ETF is less risky, SCHG or QQQ? +
Both ETFs have similar volatility with daily standard deviations around 25%. However, QQQ has experienced larger historical drawdowns (-82.98% max vs SCHG's -34.59%), though this reflects QQQ's exposure during the dot-com crash versus SCHG's more recent launch in 2009.
What are the key holding differences between SCHG and QQQ? +
SCHG includes companies like Visa, Eli Lilly, and Mastercard that aren't in QQQ, reflecting its financial and healthcare exposure. QQQ includes Netflix, Costco, and has different weightings in shared holdings, emphasizing its tech and consumer focus.
What do investors think about SCHG vs QQQ? +
Community opinions are mixed. Some investors favor SCHG for its lower fees and broader market coverage, while others prefer QQQ for its established reputation and Nasdaq-100 focus. Cost-conscious investors often lean toward SCHG, while tech-focused investors may prefer QQQ.
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Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investing involves risks, including the possible loss of principal. Always conduct your own research before making investment decisions.
