Forecast: This Outstanding Vanguard Index Fund Will Outperform the S&P 500 Again in 2025

• The Vanguard S&P 500 Growth ETF has consistently outperformed the S&P 500 on average each year since its inception in 2010.

• This ETF tracks the S&P 500 growth index, which includes 211 top growth stocks from the standard S&P 500.

• Although the Vanguard ETF is currently lagging behind this year’s S&P 500, it anticipates a rebound in 2025, with expectations to surpass the index.

The S&P 500, known for its strong returns, provided a 25% return last year (including dividends). If you had invested in the Vanguard S&P 500 Growth ETF, you’d have seen significantly higher returns of 35.9%. This ETF, which focuses on the S&P 500 Growth Index, includes the same 211 top growth stocks.

Last year’s results aren’t just a one-off; they’ve consistently averaged above the S&P 500 since 2010. I believe this trend could continue into 2025, despite the current situation at the start of the year.

To qualify for the S&P 500, companies must meet strict criteria, including a market cap of at least $20.5 billion and positive revenue over the last four quarters. Even after meeting these benchmarks, a special committee reviews quarterly to decide on new inclusions.

The S&P 500 Growth Index takes this a step further, selecting stocks based on growth metrics like momentum and sales. For instance, Nvidia, which has seen impressive revenue growth, is the largest holding in the Vanguard S&P 500 Growth ETF.

This ETF leans heavily towards sectors with many fast-growing American companies compared to the standard S&P 500.

Data Source: Vanguard. Sector weightings were accurate as of March 31, 2025 and are subject to change.

Recently, Microsoft, Alphabet, and Amazon released first-quarter results that surpassed expectations, largely thanks to a growing demand for AI services. Facebook and Instagram also benefitted from AI, leading to increased user engagement.

AI, according to PWC, could contribute around $15.7 trillion to the global economy by 2030, possibly propelling companies like Microsoft, Alphabet, and others into a new growth phase.

Interestingly, while the Vanguard ETF is tech-heavy, it maintains a diverse portfolio. Key holdings include payment giants like Visa, major investment firms such as Berkshire Hathaway, and retail leaders like Costco and Walmart.

So far in 2025, the Vanguard S&P 500 Growth ETF has declined by 4.3%, slightly underperforming the S&P 500’s drop of 3.7%. High-growth stocks faced more volatility recently as investors sought cash security, especially after significant market actions around President Trump’s tariffs.

However, since its launch, this ETF boasts an average annual return of 15.4%, exceeding the S&P 500’s 12.8% increase during the same timeframe.

I think the upward trend could persist into 2025 for several reasons. Firstly, President Trump has paused some aggressive tariffs on trading partners, which bodes well for many stocks held in the ETF.

Secondly, products from leading holdings like Nvidia and Broadcom aren’t expected to be impacted by customs duties. Additionally, sectors focused on digital subscriptions and cloud services have traditionally been insulated from tariffs, which benefits companies like Microsoft and Amazon.

Thirdly, the latest financial results should aid the Vanguard ETF in bridging its current gap with the S&P 500. Major companies like Microsoft and Meta have rebounded from annual losses following recent earnings reports.

Even if the economy slows down, these major players might weather the storm better than others due to their robust product lines and strong financial health.

Consequently, I believe there’s a significant possibility that the Vanguard S&P 500 Growth ETF will recover and outperform the S&P 500 next year.

Consider this before buying into the Vanguard S&P 500 Growth ETF.