The S&P 500 stands out as the leading index within the stock market and serves as a common reference point for assessing the performance of other stocks and indexes. In simpler terms, if revenues are low, that often signals poor performance. Generally, higher returns are a good indicator of better results.
This year, the S&P 500 has appreciated by 10%, which, when you think about it, aligns pretty well with its long-term average. Given the context, that’s not too shabby at all.
Remember Nvidia back in 2009? A similar signal is appearing again. In 2009, an unusual “double down” signal went off for a lesser-known chipmaker called Nvidia. Interestingly, a company that’s significantly smaller than Nvidia is now showing the same kind of “full conviction” signal.
However, two Vanguard Exchange-Traded Funds (ETFs) seem to have potential for outperforming the S&P this year, each with unique focuses that may actually work in their favor.
1. Vanguard Information Technology ETF
The Vanguard Information Technology ETF (NYSEMKT: VGT) includes 323 companies within its sector, spanning various tech industries. However, it does have a considerable concentration, with Nvidia, Apple, and Microsoft accounting for over 38% of the ETF.
Nvidia and Apple have had a great start this year, showing gains of 10% and 21%, respectively. In contrast, Microsoft has plunged by more than 16% as of mid-July. Yet, notably, the ETF’s strong performance this year (up 21%) can largely be attributed to its semiconductor investments.
About 38% of this fund is tied up in chip manufacturers, which are currently some of the top stocks in the market. Companies like Micron Technology, Advanced Micro Devices, and Applied Materials all rank among the top holdings, with Applied Materials still up over 121% this year, despite being the weakest performer within the ETF.
Tech ETFs have been consistently outperforming as the AI boom persists, but the factors driving this success are evolving. It began with major AI players, but is increasingly favoring niche firms, especially semiconductor businesses focusing on storage and memory technologies.
There’s an apparent demand for storage and memory solutions in data centers, along with a more favorable outlook for smaller tech companies compared to larger, multi-trillion dollar corporations.
While this ETF is quite solid if you can accept its focus, it’s also crucial to note that companies like Amazon, Alphabet, and Meta Platforms, despite being broadly classified as part of the tech sector, don’t fall under the Vanguard Information Technology ETF due to their categorization in other sectors.
2. Vanguard Energy ETF
After a period of stagnation, the energy sector is experiencing a bounce-back this year, largely influenced by conflicts in the Middle East. Prices for oil and electricity have been climbing, benefiting energy stocks significantly.
The Vanguard Energy ETF (NYSEMKT: VDE) presents a prime opportunity to capitalize on the energy sector’s resurgence, being the best-performing area within the S&P 500 thus far. It holds 111 energy stocks, similarly to the Vanguard Information Technology Fund, where top stocks play a major role in performance.
Both Exxon Mobil and Chemron contribute over 35% to this ETF, and both have performed admirably this year.
Even though the energy sector is thriving, it remains susceptible to regional tensions, particularly in the Middle East, creating a volatile landscape. Therefore, the performance of this ETF may fluctuate accordingly. Still, it can be a valuable addition to a diversified portfolio.
Predicting stock performances is tricky, but it would be quite surprising if the Vanguard Energy ETF didn’t finish the year ahead of the S&P 500.
Should you buy Vanguard Information Technology ETF stock now?
Before considering the purchase of Vanguard Information Technology ETF stock, take a moment to reflect on this:
The Motley Fool stock advisor has outlined what they see as Top 10 stocks worth looking into right now, and interestingly, the Vanguard Information Technology ETF is not on the list. Those stocks are geared for long-term growth and could generate impressive returns over the coming years.
For some perspective, consider Netflix, which was highlighted back on December 17, 2004. If you’d invested $1,000 then, it would be worth about $371,842 today!* Likewise, Nvidia was featured on April 15, 2005, with a similar return of over $1,244,783 for that same initial investment.*
Many investors trust the advice based on such performance records. With a reputation for outperforming the S&P 500 by four times, this stock advisor truly offers valuable insights. Don’t miss out on the latest Top 10 list they’re sharing.
*Stock Advisor is expected to return on July 18, 2026.
The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Applied Materials, Chevron, Meta Platforms, Micron Technology, Microsoft, and Nvidia.
Two Vanguard ETFs Outperform S&P 500 Originally published by The Motley Fool
