S&P 500 Stability vs. Superior Growth: Is VOO or VUG the Better ETF for You?

The Vanguard Growth ETF (NYSEMKT:VUG) stands out for its tech-heavy growth focus and higher recent returns, while the Vanguard S&P 500 ETF (NYSEMKT:VOO) delivers broader diversification, milder risk, and a bigger dividend payout.

Both VUG and VOO are heavyweight index ETFs from Vanguard, but they take different approaches: VUG focuses on large-cap U.S. growth stocks, while VOO tracks the S&P 500, encompassing the largest U.S. companies across all sectors. This comparison examines cost, performance, risk, and portfolio composition to help clarify which fund may be more suitable for different goals.

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 edges out VUG on cost with a lower expense ratio, making it slightly more affordable in terms of fees. VOO also delivers a higher dividend yield, which may appeal to those seeking a bigger income stream from their ETF allocation.

Performance & risk comparison

What's inside

VOO casts a wide net, holding 504 stocks and tracking the S&P 500. Its largest sector is technology at 36% of the fund, but it also has significant allocations to financial services (13%) and consumer cyclicals (11%).

Its top holdings include Nvidia, Apple, and Microsoft, each with modest portfolio weights. The fund’s size and sector spread help dampen individual stock risk compared to more concentrated funds.

By contrast, VUG leans harder into technology with an allocation of 52%, with communication services and consumer cyclicals also prominent. Its top holdings match VOO's, but they make up a larger portion of the portfolio -- amplifying both upside and drawdown potential.

VUG’s more focused growth approach may appeal to those seeking higher growth exposure, but it comes with heavier sector tilts and higher historical volatility.

For more guidance on ETF investing, check out the full guide at this link.

Foolish take

VOO and VUG are both fantastic options for ETF investors, but they have distinctly different approaches. VOO is a broad-market fund that tracks the S&P 500, while VUG is a growth-focused ETF designed to earn above-average returns over time.

Though it's not immune to short-term volatility, VOO offers greater stability. The S&P 500 has a flawless track record of overcoming market downturns and experiencing long-term growth, so this ETF is all but guaranteed to deliver positive returns over many years. The downside, however, is that you can only earn average returns with this investment.

VUG aims to beat the market by only including stocks with above-average growth potential. Historically, it has been able to achieve this, as evidenced by its higher one- and five-year returns compared to VOO. But with a higher beta and a steeper max drawdown, it's also experienced more significant volatility.

Neither investment is necessarily better than the other; rather, the right one for you will depend on your goals and risk tolerance. If you're looking for a steady workhorse of an ETF that is very likely to survive whatever the market throws at it, you can't go wrong with VOO. For those looking to maximize their earnings with higher growth potential, VUG may be a better fit.

Glossary

ETF: Exchange-traded fund; a pooled investment fund traded on stock exchanges like a stock.
Expense ratio: Annual fee, expressed as a percentage, that a fund charges to cover operating costs.
Dividend yield: Annual dividends paid by a fund or stock, shown as a percentage of its current price.
Beta: A measure of an investment’s volatility relative to the overall market, typically the S&P 500.
AUM: Assets under management; the total market value of assets a fund manages on behalf of investors.
Max drawdown: The largest percentage drop from a fund’s peak value to its lowest point over a specific period.
Growth stocks: Shares of companies expected to grow earnings or revenue faster than the overall market.
Large-cap: Companies with a large market capitalization, generally over $10 billion.
Sector allocation: The distribution of a fund’s investments across different industry sectors.
Portfolio weights: The percentage of a fund’s total assets invested in a particular holding.
Volatility: The degree of variation in an investment’s price over time, indicating risk level.
Drawdown risk: The potential for an investment to decline in value from its peak before recovering.

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