SCHG: Far More Concentration Risk Than Most Realize

seekingalpha09-02

Tom WernerFor the past decade plus, growth style investing has dominated. Why? Because Tech has dominated. When markets go down hard, growth gets punished. When markets advance, growth is where all ...

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When markets advance, growth is where all ...</p>\n\n<a href=\"https://seekingalpha.com/article/4718430-schg-far-more-concentration-risk-than-most-realize\">Source Link</a>\n\n</div>\n","source":"seekingalpha_fund","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>SCHG: Far More Concentration Risk Than Most Realize</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSCHG: Far More Concentration Risk Than Most Realize\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-02 18:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4718430-schg-far-more-concentration-risk-than-most-realize><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Tom WernerFor the past decade plus, growth style investing has dominated. Why? Because Tech has dominated. When markets go down hard, growth gets punished. When markets advance, growth is where all ...</p>\n\n<a href=\"https://seekingalpha.com/article/4718430-schg-far-more-concentration-risk-than-most-realize\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"FDN","symbol_name":"First Trust Dow Jones Internet I","start_time":0,"source_url":"https://seekingalpha.com/article/4718430-schg-far-more-concentration-risk-than-most-realize","article_id":"2464880158","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2148852132/image_2148852132.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2464880158","pubTimestamp":1725273000,"columns":[],"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Tom WernerFor the past decade plus, growth style investing has dominated. Why?Cycles are still a thing, and this is extraordinarily concentrated in a way that makes it vulnerable to a big downturn . Peer Comparison When we look at SCHG next to similar ETFs, the Vanguard Growth ETF  emerges as a close rival. Both funds have very low expense ratios and aim to track large-cap growth indexes. SCHG tracks the Dow Jones U.S. Large-Cap Growth Total Stock Market Index, while VUG tracks the CRSP US Large Cap Growth Index. When we look at the price ratio of SCHG to VUG, we find that SCHG has outperformed VUG, despite VUG having a la","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"FDN":"First Trust Dow Jones Internet I","BK4550":"红杉资本持仓","BK4588":"碎股","SCHG":"Schwab U.S. Large -Cap Growth ET","VUG":"成长股指数ETF-Vanguard MSCI","BK4585":"ETF&股票定投概念"},"translate_title":"SCHG：集中风险比大多数人意识到的要大得多","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SCHG":1,"VUG":1,"FDN":0.79},"content_text":"Tom WernerFor the past decade plus, growth style investing has dominated. Why? Because Tech has dominated. When markets go down hard, growth gets punished. When markets advance, growth is where all the action is. I’ve written before about my concerns about growth-style investing, but those concerns (so far) have been unfounded/early. If you believe that large-cap growth-style investing will continue to have momentum persistence, then you may want to consider the Schwab U.S. Large-Cap Growth ETF (NYSEARCA:SCHG). This ETF provides wide coverage of the large-cap growth sector in the U.S. stock market. This is one of the biggest large-cap growth funds out there managed by Schwab, and with $31 billion in assets, it’s clear a lot of money loves the portfolio and low fees at just 0.04% of the portfolio. SCHG aims to match how well the Dow Jones U.S. Large-Cap Growth Total Stock Market Index does before fees and costs. This index adjusts for float and weighs by market cap, zeroing in on the large-cap growth part of the Dow Jones U.S. Total Stock Market Index. A Look At The Holdings I mentioned at the start that Tech has dominated US momentum for well over a decade. When we look at the top holdings of SCHG, we can see that the top names have direct exposure to this dominance.   schwabassetmanagement.comThese five positions by themselves make up 44.5% of the fund's total assets, which is a huge chunk. This shows how much the fund focuses on big tech companies. It's not unexpected, though, given that the fund aims to tap into the growth potential of large U.S. companies. The key thing here though is how much concentration risk there is. Yes – Apple, Microsoft, Nvidia, Amazon, and Meta are huge, huge companies. And for good reason. But to have so much of a “diversified” portfolio in just a small number of stocks like this seems very risky to me, no matter how great these companies are. Sector Analysis and Portfolio Composition So we have nearly 45% in the top 5 companies, which shows huge concentration risk on a stock level. And guess what? We also have huge concentration at the sector levels as well, with Tech making up nearly half the portfolio.   schwabassetmanagement.comThe tech sector is known to grow fast. Many companies in this field show strong earnings growth and come up with new business initiatives all the time. And it’s clearly worked. My problem here is, what happens when it doesn’t? Cycles are still a thing, and this is extraordinarily concentrated in a way that makes it vulnerable to a big downturn (at some point). Peer Comparison When we look at SCHG next to similar ETFs, the Vanguard Growth ETF (VUG) emerges as a close rival. Both funds have very low expense ratios and aim to track large-cap growth indexes. SCHG tracks the Dow Jones U.S. Large-Cap Growth Total Stock Market Index, while VUG tracks the CRSP US Large Cap Growth Index. When we look at the price ratio of SCHG to VUG, we find that SCHG has outperformed VUG, despite VUG having a larger allocation to Tech at 60% of that fund’s assets. This may have to do with the larger allocation VUG has to Consumer Discretionary stocks relative to SCHG, as that sector has lagged quite meaningfully in recent years.   stockcharts.comPros and Cons On the plus side, the fund lets you invest in some of the fastest-growing and most forward-thinking companies in the U.S. market. These growth-focused businesses often work in areas like tech, healthcare, and consumer goods, which have historically produced high returns over time. By putting money into SCHG, you get quick and easy access to where, candidly, all the action is. But we should keep some downsides in mind. The fund's big focus on Tech could make it more volatile when markets get rough. And they inevitably will if tech takes a big hit, SCHG might see bigger losses than other funds. Potentially substantially worse. And because this fund chases growth, it might not do as well when value stocks are hot. I’m personally more bullish on Value than Growth, but it remains to be seen if a sustained style rotation will ultimately take place after years of disappointment there. Conclusion  The Schwab U.S. Large-Cap Growth ETF stands out as a great choice for investors who want to tap into the growth potential of big American companies. Its low fees, diverse portfolio, and solid performance history make it an appealing option for those looking to invest in market leaders in cutting-edge sectors. While the fund's heavy focus on tech might worry some like me, SCHG's emphasis on well-established companies with proven growth paths helps reduce some of these risks. Overall, a good fund for what it does. I just worry about the stock and sector concentration risks.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2464880158"}