With a substantial assist from the rapidly evolving, high-flying artificial intelligence (AI) investment thesis, growth stocks are in the midst of a multiyear stretch of outperforming their value counterparts.
That theme is palpable in large-cap and megacap territory, where some of the best-performing stocks of the past decade reside. That group includes story stocks such as Nvidia (NASDAQ: NVDA) and Tesla (NASDAQ: TSLA), confirming that investors reaped significant rewards if they selected the right stocks.
Tantalizing as the long-term returns by those stocks and others are, some investors don’t want the hassle of stock-picking and opt for exchange-traded funds (ETFs) to tap growth stocks. The Schwab U.S. Large-Cap Growth ETF (NYSEMKT: SCHG) is one of the largest funds in the category and an excellent idea for investors looking to put $100 to work today.
This $53.34 billion ETF embodies an easy-to-understand index fund. The Schwab fund tracks the Dow Jones U.S. Large-Cap Growth Total Stock Market index, which has a track record spanning over two decades.
That gauge scans the universe of domestic large-cap companies, searching for those that meet specific growth criteria, including earnings and sales growth. The result is a basket of nearly 200 stocks weighted by market capitalization. It’s a no-frills approach that has served investors well, as Schwab has outpaced several of its primary rivals over the past decade.
Stretching even farther back, this growth ETF outpaced the category average through its first 15-plus years on the market, lagging the group only twice.
This ETF’s status as a passive, cap-weighted fund is pertinent to investors because in the fast-paced world, large- and megacap growth stocks change quickly. Oftentimes, it’s difficult for active managers to keep up. For the 10 years ending in February 2025, only 10% of active growth managers outperformed the Russell 1000 Growth Index, and they didn’t fare much better over the trailing one, three, and five-year periods.
That doesn’t mean that there aren’t some fine active managers in the growth realm. There are, but it’s also clearly hard to consistently beat benchmarks. With this Schwab ETF, investors minimize the risk of disappointment because, minus its annual fee, the fund is expected to deliver performance in line with its underlying index.
