MGK Outperforms VOO, But Is It Worth the Added Risk? Here's What Investors Need to Know Before Buying

The Vanguard Mega Cap Growth (NYSEMKT:MGK) and the Vanguard S&P 500 (NYSEMKT:VOO) differ the most in portfolio concentration, sector exposure, and historical risk, with VOO providing broader diversification and MGK leaning into high-growth mega cap stocks.

Both funds are passively managed by Vanguard and focus on large U.S. companies, but their strategies diverge. MGK tracks mega-cap growth stocks, concentrating on the market’s largest technology names. VOO, in contrast, tracks the S&P 500 Index, offering exposure to the 500 largest U.S. stocks across all major sectors. Here’s how they compare on cost, returns, and risk.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

VOO is more affordable on fees with a lower expense ratio, and it also delivers a higher dividend yield that may appeal to cost-conscious or income-focused investors. MGK charges a slightly higher fee but has outperformed VOO over the last year.

Performance & risk comparison

What's inside

VOO holds 504 stocks with the greatest exposure across technology (36%), financial services (13%), and consumer cyclical (11%) sectors. Its top positions include Nvidia, Microsoft, and Apple, each representing a smaller portfolio weight than in MGK. The fund is designed to mirror the S&P 500, making it broadly diversified and suitable for those seeking a core holding.

MGK, in contrast, is much more concentrated with just 66 holdings, and its sector mix is dominated by technology (57%), communication services (15%), and consumer cyclical (13%). Its largest positions are also Nvidia, Microsoft, and Apple, but with greater portfolio weights than VOO, reflecting its focus on mega-cap growth. This tilt may lead to higher potential returns in strong tech markets, but also greater drawdowns in downturns.

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Foolish take

VOO and MGK both provide exposure to the largest companies in the U.S., but MGK offers more targeted access to only the most massive stocks. Mega-cap stocks are generally defined as those with a market cap of at least $200 billion, compared to the $10 billion requirement for large-cap stocks.

Many of the mega-cap stocks in today's market are technology companies, which is a sector known for its explosive growth and volatility. While mega-cap stocks are likely to pull through periods of market turbulence due to their sheer size and strength, they can still experience significant price fluctuations -- as seen with MGK's deeper drawdowns and higher beta.

VOO, on the other hand, offers a more diversified assortment of stocks. Although of the stocks within the S&P 500 are large-cap industry leaders, they come from a wider variety of sectors with less of a tilt toward technology. This can limit volatility in the short term, even if it sometimes results in lesser total returns.

In short, MGK boasts more potential rewards but with slightly more risk, while VOO offers more long-term stability.

Glossary

ETF: Exchange-traded fund; a basket of securities traded on an exchange like a stock.
Expense ratio: Annual fee, expressed as a percentage, that funds charge investors to cover operating costs.
Dividend yield: Annual dividends paid by a fund or stock divided by its current price, shown as a percentage.
Beta: A measure of an investment's volatility compared to the overall market, usually the S&P 500.
AUM: Assets under management; the total market value of assets a fund manages for investors.
Max drawdown: The largest percentage drop from a fund’s peak value to its lowest point over a specific period.
Mega cap: Companies with extremely large market capitalizations, typically over $200 billion.
Sector exposure: The proportion of a fund’s assets invested in specific industry sectors.
Portfolio concentration: The degree to which a fund’s assets are allocated to a small number of holdings.
Core holding: A foundational investment intended to be a primary, stable part of a portfolio.

Katie Brockman has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool 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.