Large-cap growth stocks have been soaring this year, driven by the strong demand for artificial intelligence and cutting-edge weight loss drugs. Consequently, several exchange-traded funds (ETFs) that focus on these themes have delivered impressive returns this year. Perhaps most importantly, though, this trend is likely to continue in the coming years as AI becomes more pervasive and more next-generation weight loss medicines hit the market.
How can investors choose the best large-cap growth ETF to take advantage of this trend? To answer this question, I compared three of the most popular funds in this category. Keep reading to find out more.
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Large-cap growth ETFs: A comparison
One of the best ways to invest in large-cap growth stocks is through ETFs that track this segment of the market. Among the most popular ETFs in this category are the iShares S&P 500 Growth ETF (IVW 1.93%), the Schwab U.S. Large-Cap Growth ETF (SCHG 1.95%), and the Vanguard Growth Index Fund (VUG 1.82%).
These funds are all designed to replicate the performance of a benchmark index of large-cap growth stocks. They also have low fees, consistently strong returns over the prior 10 years, and exposure to key growth themes like AI and obesity care.
The table below outlines each fund's key metrics and compares them to the Vanguard 500 Index Fund (VOO 1.00%), which tracks the S&P 500.
|
ETF |
Benchmark |
Expense Ratio (%) |
Yield (%) |
Alpha |
Beta |
10-Year Total Return (%) |
|---|---|---|---|---|---|---|
|
IVW |
S&P 500 Growth |
0.18 |
0.96 |
(3.39) |
1.11 |
253.1 |
|
SCHG |
Dow Jones U.S. Large-Cap Growth Total Stock Market Index |
0.04 |
0.43% |
(0.76) |
1.16 |
310.4 |
|
VUG |
CRSP US Large Cap Growth Index |
0.04 |
0.56 |
(2.60) |
1.18 |
280.4 |
|
VOO |
S&P 500 |
0.03 |
1.47 |
(0.04) |
1.00 |
218.5 |
Alpha and betas refer to the ETF's performance relative to the S&P 500 over the past 36 months. Total returns assume the dividend was reinvested and taxes were deferred over the theoretical holding period.
All of these large-cap growth ETFs handily outperformed the benchmark S&P 500 over the past 10 years. However, one of them stands out from the rest in terms of performance and cost efficiency. The SCHG, offered by Charles Schwab, has delivered the highest total returns among the trio, and it matches the Vanguard Growth Index Fund on the expense ratio front.
For investors who prioritize liquidity, though, the IVW might be a better choice, as it has the highest average daily volume of the three ETFs at around 1.97 million shares traded over the past three months. This feature makes it more suitable for active trading strategies. That being said, the other two funds are also highly liquid, making them suitable for most lay investors, especially those with a long-term outlook.
Winner
Although all three of these large-cap growth ETFs may be worth buying as part of a diversified portfolio, the Schwab U.S. Large-Cap Growth ETF is arguably the best choice if you can only buy one of these supercharged funds. It offers extremely low fees and superior returns compared with its immediate peers in the same category.
