Vanguard Growth ETF Outperforms S&P 500 ETF
In the long term ETFs (Exchange-Traded Funds) that hold a large proportion of growth-oriented technology stocks have tended to outperform ETFs that hold a mix of diversified growth and non-growth stocks. Such is the case for the Vanguard Growth ETF (VUG), which holds 188 growth stocks. Technology stocks make up almost 60% of the portfolio. Consumer discretionary stocks make up about 17% of the portfolio.
As the chart below shows, VUG has consistently outperformed the SPDR® S&P 500® ETF Trust (SPY), which holds all S&P 500 stocks. The chart assumes that a $1,000 one-time investment was made in each ETF in February 2004 - VUG's inception date was January 26, 2004. As of August 30, 2024, the value of VUG is $9,173 (11.42% annualized return) and the value of SPY is $7,071 (!0.01% annualized return). These values assume all dividends were reinvested.
Growth stocks tend to have higher price to earning ratios (P/E) than non-growth stocks like value and income stocks. Also, VUG holds fewer stocks than SPY so each stock in VUG has a higher weight than the same stock in SPY. For example, Apple (APPL) has a 12.89% weighting in VUG and a 7.04% weighting in SPY.
See Vanguard S&P 500 Growth ETF Outperforms S&P 500 ETF.
See Vanguard Information Technology ETF Outperforms S&P 500 ETF.
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Posted September 3, 2024