Exchange-traded funds (ETFs) have transformed modern investing, offering cost-effective, diversified access to the stock market. While individual stocks can yield higher returns, ETFs provide a balanced approach, spreading investments across various sectors and companies to mitigate risks. They have become popular due to their lower costs compared to mutual funds, the ability to trade throughout the day, and their tax efficiency.
Investors seeking long-term wealth creation often aim for a portfolio that spans different market capitalizations. Large-cap stocks offer stability through well-established businesses, mid-caps combine stability with growth potential, and small-caps have the potential for outsized returns as they expand. By utilizing ETFs, investors can access these market segments without the risks of picking individual stocks.
Large-Cap Growth with SCHG
For exposure to America’s leading large-cap companies, the Schwab U.S. Large-Cap Growth ETF (SCHG) is an excellent choice. This fund focuses on high-growth businesses selected based on metrics like sales growth and earnings momentum. Since its inception in 2009, SCHG has delivered total returns of 894% in tax-advantaged accounts, outperforming both its Vanguard competitor (814%) and the broader S&P 500.
SCHG combines robust performance with an industry-leading expense ratio of 0.04%, which is 95.8% cheaper than the category average. Though its 0.43% yield is modest, the fund prioritizes capital appreciation, making it an attractive option for long-term investors seeking stability and growth.
Mid-Cap Growth Opportunities with IMCG
For mid-cap exposure, the iShares Morningstar Mid-Cap Growth ETF (IMCG) targets medium-sized companies poised for above-average earnings growth. Since its launch in 2004, IMCG has consistently outperformed its peers, including Vanguard’s mid-cap funds and the S&P 500, solidifying its reputation as a category leader.
This ETF is also highly cost-effective, with a 0.06% expense ratio—87% below the category average. Its 0.83% yield provides a modest income stream, complementing the fund’s focus on above-average growth. With a nearly two-decade track record of market-beating performance, IMCG demonstrates the benefits of investing in mid-sized growth companies.
Small-Cap Value with AVUV
The Avantis U.S. Small Cap Value ETF (AVUV) offers a unique approach by actively managing its portfolio of undervalued small-cap companies. Unlike many passive funds, AVUV employs a hands-on strategy to identify opportunities in the small-cap space.
Launched in 2019, AVUV has consistently outperformed the Vanguard Small-Cap Index Fund and the S&P 500. Despite its active management, the fund maintains a reasonable expense ratio of 0.25%. It also offers an impressive yield of 1.65%, which is notably higher than many small-cap-focused ETFs. This combination of active management, strong performance, and meaningful income makes AVUV a standout in its category.
A Complete Market-Cap Strategy
Together, these three ETFs—SCHG, IMCG, and AVUV—provide a comprehensive and sophisticated investment strategy. SCHG captures the stability and growth of America’s largest companies, IMCG focuses on mid-sized firms with high growth potential, and AVUV adds a value-driven approach to smaller companies.
By combining these funds, investors can achieve diversified market exposure across the capitalization spectrum, balancing stability, growth, and value. Each ETF maintains low costs, delivers strong historical returns, and offers unique advantages tailored to its market segment.
For those looking to build a portfolio that spans the full breadth of the market, these ETFs provide a streamlined and efficient solution. With their proven track records and investor-friendly structures, they represent a compelling option for long-term wealth creation.
