Let’s set aside specific funds for the moment, we’ll get back there, first let’s talk about diversification.
In the most extreme portfolio you could yolo Tesla options. This takes on a lot of risk. It could make you a ton of money, or it could lose all your money. Less extreme you could buy a direct single stock, it’s less risk than options, but it could still make or lose you a lot of money if you pick the “right” or “wrong” stocks. It’s very hard to consistently pick the best stocks that have high growth while avoiding the bad stocks that crater. To do it flawlessly would require a time machine or extreme luck.
To mitigate that risk of picking stocks poorly, many people buy baskets of stocks (like the sp500). And you can take this further: Why just the biggest companies and not the total US market? Why just the US and not international stocks? Why just stocks and not other asset classes like bonds or real estate? The short answer is that we don’t know where growth will come from nor the world event that will drive them.
It’s also important to realize that diversification reduces the variance in outcomes, and while people concentrate on the fact that you’ll have less downside it also means less upside. The latter become obvious if you look at which stocks shot up in an index you own and compare your return on the index vs if you’d held just the few stocks that did well. This is why you’ll sometimes hear people call it ”diworsificstion”.
So back to your questions:
- Why VTI vs QQQ: they have vastly different diversification profiles (3,500 stocks vs 100), so generally you’d expect QQQ to have more risk, which means more upside and downside potential
- Why BND vs SCHD: bonds are a different asset class vs stock, and despite some functional similarities with dividends, they don’t behave the same in all market circumstances, so again you’re looking at a diversification call
None of this is trying to tell you what to do, but I think the framing on your approach is wrong, you’re comparing a diversified portfolio with the return on a less diversified portfolio. Ideally you start with assessing your risk tolerance and then choose allocations from there.