Vanguard Growth ETF Outperforms Small-Cap Peer Over Five Years

Vanguard Morningstar Growth ETF (VUG) and Vanguard Morningstar Small-Cap Growth ETF (VBK) are both growth-oriented ETFs, but they differ in their target markets and performance. VUG focuses on large-cap technology leaders, accounting for over half of its portfolio, with Nvidia, Apple, and Microsoft as its largest holdings. It delivers an excellent total return of 79% over the last five years, with a compound annual growth rate (CAGR) of 12.3%.

VUG also boasts a slightly lower expense ratio of 0.03%, compared to VBK's 0.05%. On the other hand, VBK targets smaller, emerging companies across various sectors, with technology comprising only about 25% of its portfolio. Its largest positions include Natera, Twilio, and Revolution Medicines. Over the same period, VBK has generated a total return of 17% and a CAGR of 3.2%.

Both ETFs offer a modest 0.4% dividend yield. While both funds are cost-effective, VUG's lower expense ratio may make it a more attractive option for investors seeking strong growth performance in large-cap technology stocks. However, investors looking to diversify away from big tech stocks may find VBK's small-cap focus and reasonable fees appealing.

Ultimately, the choice between these two ETFs will depend on an investor's risk tolerance, investment goals, and preference for growth in established tech leaders or emerging small-cap companies.