In the relentless rhythm of the markets, where the heartbeat of the S&P 500 (SNPINDEX: ^GSPC) echoes with the quiet certainty of time, only the boldest stride forward to carve their path through the thicket of collective mediocrity. For decades, this index has stood as a monolith, unyielding to the efforts of 92% of active large-cap U.S. equity funds, which faltered in its shadow over the last twenty years.
Yet, within this vast expanse of uniformity, there lies a secret whispered among the winds: the power of a few luminous stars. Imagine, if you will, the cosmic fortune of those who embraced Amazon two decades past. Their portfolios, once ordinary, now shimmer with the brilliance of celestial returns, transforming the mundane into the extraordinary.
This alchemy of outsized positions in large-cap growth stocks has been the whispered incantation to surpass the S&P 500 in recent years. The Vanguard Growth ETF (VUG) stands as a testament to this truth, a vessel designed to harness the tempest of growth. Here lies the essence of its enduring allure.
The Growth ETF’s Triumphs: A Tale of Three Sectors
The Vanguard Growth ETF, with its modest expense ratio of 0.04%, contrasts gently with the 0.03% of the Vanguard S&P 500 ETF (VOO). A mere $1 difference for every $10,000 invested, yet it opens a portal to a world of possibilities absent in the S&P 500 ETF.
Observe the tableau of performance over the past decade, where the Growth ETF danced with abandon, outpacing its counterpart in 2017, 2020, 2023, and 2024.
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 YTD | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Vanguard Growth ETF | 3.3% | 6.3% | 27.7% | (3.3%) | 37% | 40.2% | 27.3% | (33.2%) | 46.8% | 32.7% | 10.5% |
| Vanguard S&P 500 ETF | 1.3% | 12.2% | 21.8% | (4.5%) | 31.4% | 18.3% | 28.8% | (18.2%) | 26.3% | 25% | 9% |
The fall of the Growth ETF in 2022 was but a fleeting shadow, eclipsed by the radiant gains of subsequent years. Even amidst the S&P 500’s higher dividend yield, the Growth ETF’s total return of 353.4% over the decade whispers softly against the 264.2% of its counterpart. A $10,000 investment blooms into $45,240, a testament to the power of patience and conviction.
Should the sectors of technology, communications, and consumer discretionary continue their ascent, the Growth ETF will rise in tandem. With 80.1% of its weight anchored in these sectors, compared to 53.3% for the S&P 500, it stands as a beacon of focused ambition amidst a sea of diversification.
Reinvestment: The Catalyst of Earnings Growth
The Vanguard Growth ETF’s essence lies in its concentrated embrace of a select few: Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta Platforms, Broadcom, Tesla, Eli Lilly, Visa, Mastercard, Netflix, Costco Wholesale, and Palantir Technologies. These titans have bestowed upon the S&P 500 gains disproportionate to their peers, and the Growth ETF, overweight in their favor, has reaped bountifully from their triumphs.
Yet, amidst the lofty valuations, one must ponder the sustainability of their dominance. What barriers lie before these companies, hindering their ability to grow earnings at an above-average rate? The essence of growth stocks lies in their capital allocation, their willingness to invest in the fertile fields of artificial intelligence, cloud computing, robotics, e-commerce, and more.
Amazon, a paragon of reinvestment, channels its cash flow into the veins of growth initiatives. Its journey is marked by both failures and monumental successes, such as its ascendancy in cloud computing and the expansion of its e-commerce empire. The price of its ambition is volatility, a tempest that rewards the patient investor with rich harvests over time.
The Growth ETF: A Beacon for the Future
There exists no certainty that the Vanguard Growth ETF will continue its dance beyond the S&P 500, yet it has carved a path as one of the simplest means to outpace the index.
Its success is no accident, for it leans heavily on leading companies that invest fervently in their future earnings rather than returning capital to shareholders. This strategy, though fraught with risk, promises enduring gains for those with the fortitude to weather the storms.
I anticipate the Vanguard Growth ETF to shine brighter than the S&P 500 ETF over the next decade, a beacon for those with the vision to see beyond the horizon. Yet, in the short term, its light may dim; only those with the patience to endure its volatility will find its embrace worthwhile. 🌱
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2025-07-31 12:53