Vanguard Growth ETF vs. Vanguard Value ETF: Which ETF Will Outperform in 2026?
Key Points
The Vanguard Growth ETF has handily outperformed the Vanguard Value ETF in recent years.
Both are low-cost index funds from Vanguard.
There are some big potential catalysts favoring value stocks that could happen in 2026.
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Growth stocks have dramatically outperformed value stocks in recent history, but over long periods, it's a different story. In fact, since 1927, value stocks have outpaced growth stocks by more than four percentage points annually.
Vanguard offers two excellent index funds for investors who want to focus on growth or value stocks, the Vanguard Growth ETF (NYSEMKT: VUG) and the Vanguard Value ETF (NYSEMKT: VTV). Both are low-cost ways to invest, but which will be the better performer in 2026?
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Here's what you need to know about each ETF, and which one I think will deliver the stronger performance for investors next year.
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Vanguard Growth ETF
The Vanguard Growth ETF tracks an index of large-cap growth stocks. It has 160 stocks in its portfolio, and it is a weighted index fund, meaning that larger companies make up a larger percentage of assets.
As you might expect, top holdings include the mega-cap tech stocks, such as Nvidia (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), and Amazon (NASDAQ: AMZN). And because of the top-heavy nature of U.S. growth stocks, the 10 largest holdings account for 60% of the fund's holdings. So, before investing, it's important to realize that the performance is largely dependent on a relatively small number of stocks.
Like most Vanguard ETFs, this is an extremely low-cost way to get exposure to growth stocks. It has a 0.04% expense ratio, which is the fund's total fees as a percentage of assets.
Vanguard Value ETF
The Vanguard Value ETF tracks an index of large-cap value stocks, and owns over 300 different stocks. Not only are there more stocks in the Value ETF, but because there are really no 'mega-cap' value stocks, the fund's assets are far more diversified, with the 10 largest holdings making up just 21% of the assets.
Just to name a few, the Vanguard Value ETF's largest holdings include JPMorgan Chase (NYSE: JPM), Berkshire Hathaway (NYSE: BRK.B), ExxonMobil (NYSE: XOM), Walmart (NYSE: WMT), and Johnson & Johnson (NYSE: JNJ). And the ETF has the exact same 0.04% expense ratio as its growth-oriented counterpart.
Which will outperform in 2026?
Of course, there's absolutely no way to know for sure what 2026 will hold. There's a lot that can happen, and trying to time the market is generally a losing battle. So, regardless of which one that you or I feel will be the best performer in 2026, both ETFs are best suited as long-term investments.
Having said that, the Vanguard Growth ETF has been the clear winner in recent years. Over the past decade, the Vanguard Growth ETF has delivered a 395% total return, while the Vanguard Value ETF has managed less than half of that. The short explanation is that the AI boom and pandemic-fueled tech surge have both fueled its outperformance.
However, because of this, there is now a massive valuation gap between the two. The average stock in the Vanguard Growth ETF's portfolio trades for about 41 times earnings, while the average P/E for a Vanguard Value ETF component is less than 21.
In addition, although the explosion in AI investment isn't showing signs of coming to an end, there are some positive catalysts for value stocks -- specifically the falling-rate environment we appear to be in, and the generally friendly regulatory environment, both of which could disproportionately benefit value stocks.
With that in mind, my prediction is that the Vanguard Value ETF will be the better performer of the two in 2026 -- but that both ETFs will deliver excellent returns over the next decade or more.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Matt Frankel has positions in Amazon and Berkshire Hathaway. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, JPMorgan Chase, Microsoft, Nvidia, Vanguard Index Funds-Vanguard Growth ETF, Vanguard Index Funds-Vanguard Value ETF, and Walmart. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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