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Growth vs. S&P 500: Which Vanguard ETF Wins?
24 Nov
Summary
- VUG focuses on tech growth stocks; VOO offers broad S&P 500 diversification.
- VUG shows higher recent returns but with potentially more risk.
- VOO is more affordable and offers a higher dividend yield.
Investors seeking large-cap U.S. stock exposure have two compelling options from Vanguard: the Vanguard Growth ETF (VUG) and the Vanguard S&P 500 ETF (VOO). While both funds maintain low costs and focus on large companies, their strategies diverge significantly. VUG aggressively targets growth stocks, particularly in the technology sector, leading to higher recent performance but also greater volatility and concentration in its top holdings.
VOO provides a broader diversification by tracking the S&P 500 index, encompassing all 500 companies. This approach results in a more balanced sector allocation, with technology representing a smaller portion compared to VUG. Consequently, VOO is often favored by investors prioritizing stability and a higher dividend yield, alongside a more affordable expense ratio.
Despite VOO's wider diversification, VUG has demonstrated superior returns over the past three years, surging by 106% compared to VOO's 65%. This highlights the trade-off between concentrated growth potential and broad market stability, offering investors a clear choice based on their risk tolerance and investment objectives.
