The Vanguard Growth ETF has shown impressive performance compared to the S&P 500, largely thanks to its distinct portfolio.
The CRSP US Total Market Index encompasses all 3,498 companies listed on U.S. stock exchanges. In parallel, the CRSP US Large Cap Growth Index captures 85% of the total market capitalization of the Total Market Index. If you were to rank all those stocks from largest to smallest, the Large Cap Growth Index would cover the top portion, taking into account 85% of the market’s overall value.
This index contains only 150 stocks—yes, just 150 companies represent that hefty share of the American stock market’s value. This isn’t all that shocking, especially when you think about titans like Nvidia, Alphabet, and Apple, which together are valued at around $12.2 trillion.
Among the ETFs that align with large-cap growth indexes is the Vanguard Growth ETF (VUG +0.78%). Since its launch in 2004, its concentrated portfolio of strong U.S. blue-chip stocks has allowed it to consistently eclipse market performance, and based on this trend, I’m anticipating that 2026 will continue that path.
Diversified exposure to high-quality stocks
The Vanguard Growth ETF holds around 150 stocks, but its top five make up an impressive 49.5% of the total portfolio value, which speaks to its high-caliber status.
|
Stock |
Vanguard ETF Portfolio Weighting |
|---|---|
|
1. Nvidia |
12.73% |
|
2. Apple |
11.88% |
|
3. Microsoft |
10.63% |
|
4. Alphabet |
9.66% |
|
5. Amazon |
4.58% |
These companies are some of the biggest names in tech, at the forefront of the AI revolution, each pouring significant resources into creating advanced data centers and software.
Since the AI sector began to flourish in early 2023, those five stocks have seen average returns of 363%, easily surpassing the 80% gain of the S&P 500 during that time. This performance has undeniably contributed to the Vanguard Growth ETF’s recent success.
While I expect these stocks to keep delivering good results, I want to point out a few other holdings in this ETF that might also experience growth over the next year and beyond.
- Netflix has established itself as the leading streaming platform but has seen its stock dip 34% from its peak following a strong performance last year. Still, there’s a lot of potential there given the momentum the company has.
- Oracle is known for its robust and cost-effective data center solutions in the AI field. Although there are worries about its debt levels, I believe that the stock will rise over the long haul due to the ever-increasing demand for computing power.
- Uber Technologies runs the largest ride-hailing operation globally and is well-positioned to spearhead a transformation to self-driving cars, which could fundamentally alter its business model.
- CrowdStrike is seeing increased demand for its AI-driven cybersecurity platform, Falcon. Its stock is currently about 20% lower than its all-time peak, which might attract some buyers as we move into 2026.
Yet, it’s important to note that Vanguard’s ETF isn’t solely focused on tech. Companies like Eli Lilly, Visa, MasterCard, Costco Wholesale, and McDonald’s are also positioned among its top 20 holdings.
The Vanguard ETF’s potential to outperform the S&P 500 again in 2026
Since its inception in 2004, the Vanguard Growth ETF has achieved an average annual return of 12.1%, outpacing the S&P 500’s 10.5% over the same timeframe.
The CRSP US Large Cap Growth Index undergoes quarterly rebalancing, similar to Vanguard ETFs. This helps to eliminate stocks that no longer meet performance standards and refresh the list with better options, effectively filtering out underperformers that can hinder other indexes, like the S&P 500.
Adopting a more aggressive approach toward growth stocks clearly drives returns. Still, it’s worth mentioning that exposure to weaker market sectors can also provide an advantage. Take the financial sector, for instance, which constitutes 13.1% of the S&P 500, compared to just 5.5% in the Vanguard ETF. Likewise, the Utilities sector takes up 2.3% of the S&P but only 0.1% in the Vanguard ETF.
Looking ahead, I believe that the tech sector, especially stocks like Nvidia leading the AI surge, positions the Vanguard Growth ETF well to surpass the S&P 500 once more in 2026. However, even if the AI hype diminishes, the ETF maintains significant exposure to the more stable areas of tech, like streaming, software, and cybersecurity, which typically feature reliable revenue streams (think names like Microsoft, Alphabet, Amazon, Netflix, and CrowdStrike).
