Vanguard Growth: A Modest Triumph

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The pursuit of exceptional returns, naturally, dominates the minds of those entrusted with other people’s money. Growth stocks, those volatile creatures, are particularly favoured, though the logic of paying a premium for projected, rather than actual, earnings has always struck me as a species of amiable delusion. The truly successful, it seems, are those who stumble upon a handful of winners – a fortunate accident more often than a display of acumen – and then, with a commendable lack of modesty, attribute it all to skill.

For the less gifted, or perhaps the more sensible, there are these exchange-traded funds. A convenient means of participating in the frenzy without the tiresome necessity of actual research. The Vanguard Growth ETF (VUG 0.89%) is one such offering, and it has, by all accounts, performed respectably. The analysts at the Voyager Portfolio, with their customary enthusiasm, have been investigating its workings. This, then, is an assessment of its recent history, presented with a degree of scepticism that may be considered unusual in these parts.

A Decent, if Unremarkable, Record

Over the past fifteen years, Vanguard Growth has yielded an average annual return of 15.13%. Not to be sneezed at, certainly, but hardly a cause for national rejoicing. It has, we are told, exceeded the performance of the typical growth ETF by nearly two percentage points annually, and even outperformed the S&P 500. These figures, while not entirely negligible, merely confirm the obvious: that markets occasionally rise, and those who happen to be invested at the right time benefit accordingly. To suggest that this represents some sort of profound insight is, frankly, rather precious.

In recent years, the fund has demonstrated a certain volatility, experiencing both impressive gains and rather alarming declines. In 2023, it returned nearly 47%, a performance that, while gratifying to investors, merely reflected the prevailing optimism of the moment. Similar gains were recorded in 2019, 2020, and 2021 – years characterised by a distinct lack of economic reality. However, 2022 proved a more sobering experience, with a decline of 33%, placing it firmly in the bottom 30% of its peers. A timely reminder, perhaps, that markets are not unidirectional.

Dividends: A Mere Technicality

One should not expect a substantial income stream from Vanguard Growth. Growth companies, naturally, prefer to reinvest their profits, a practice that, while logical, often seems to escape the notice of those seeking immediate gratification. Indeed, the fund distributed a mere $2 per share last year, yielding a paltry 0.4% to 0.5%. A sum so insignificant that it hardly warrants mention, yet one that seems to reassure investors that something, at least, is happening.

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It is worth noting that Vanguard Growth has proven reasonably tax-efficient, a virtue often overlooked in the pursuit of higher returns. The ETF structure, it seems, allows for a degree of portfolio management that avoids costly capital gains distributions. A small mercy, perhaps, in a world increasingly burdened by taxation.

The Inevitable Turbulence

Whether Vanguard Growth can maintain its performance remains to be seen. Markets, as any seasoned observer knows, are prone to fits of irrationality. The final article in the Voyager Portfolio series will no doubt address this question with its customary optimism. I, however, remain cautiously pessimistic. The pursuit of exceptional returns is, after all, a fool’s errand. A modest triumph, such as that achieved by Vanguard Growth, is perhaps the best one can realistically hope for.

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2026-03-24 19:14