Vanguard Morningstar Growth ETF has delivered a total return of 79% over the last five years, significantly outpacing the 17% return of its small-cap counterpart. This performance gap highlights the distinct risk and reward profiles available to investors seeking exposure to the growth factor at opposite ends of the market capitalization spectrum.
The Vanguard Morningstar Growth ETF (VUG) focuses on large-cap growth stocks, with a portfolio heavily concentrated in technology. Tech stocks account for 58% of the fund, followed by communication services at 15% and consumer cyclical at 11%. The fund's three largest positions are Nvidia Corp at 13.49%, Apple Inc at 12.51%, and Microsoft Corp at 9.75%. In total, VUG holds 166 stocks and was launched in 2004. Over the trailing 12 months, the fund paid $0.35 per share, resulting in a dividend yield of approximately 0.4% on a recent share price of $89.78.
In contrast, the Vanguard Morningstar Small-Cap Growth ETF (VBK) targets a more fragmented universe of younger companies. Its sector allocation is more diversified, with technology comprising 27% of the portfolio, while both industrials and healthcare account for 20% each. VBK holds 579 stocks, also launched in 2004. Its largest positions are significantly smaller in weight, led by Natera Inc at 1.62%, Twilio Inc at 1.28%, and Revolution Medicines Inc at 1.19%. The small-cap fund has paid $1.40 per share over the trailing 12 months, which equates to a 0.4% yield on a recent share price of $335.02.
Both funds offer low-cost access to growth strategies, though VUG holds a slight expense ratio advantage. The large-cap fund charges an expense ratio of 0.03%, while the small-cap fund charges 0.05%. The performance disparity between the two is primarily driven by sector weighting; VUG's heavy tilt toward big tech has benefited from recent market leadership in that sector, yielding a compound annual growth rate of 12.3%. VBK, with a lighter tech allocation, achieved a compound annual growth rate of 3.2% over the same period.
Investors must weigh these performance figures against their portfolio diversification goals. While VUG has been the stronger performer over the last five years, VBK provides exposure to small-cap growth companies for those looking to reduce reliance on mega-cap technology leaders. Both funds maintain similar income distributions, with yields hovering near 0.4%, making cost and sector exposure the primary differentiators for growth-oriented investors.