This Vanguard Index Fund Is Absolutely Crushing the S&P 500 This Year

The S&P 500 (SNPINDEX: ^GSPC) has fallen 1% year to date, dragged lower by particularly large losses in the financials, consumer discretionary, and technology sectors. However, the energy sector has added 30% in 2026 as the Iran conflict has pushed oil prices to a multiyear high.

Consequently, the Vanguard Energy ETF (NYSEMKT: VDE) has crushed the S&P 500 year to date, outperforming the benchmark index by more than 30 percentage points. Is it too late to buy the energy-focused fund? Here's what investors should know.

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The Vanguard Energy ETF

The Vanguard Energy ETF tracks the performance of 106 companies in the energy sector. The index fund provides exposure to businesses that operate across every facet of the oil and gas supply chain: exploration and production (upstream), transportation and storage (midstream), and refining and marketing (downstream). The five largest holdings are listed below:

1. ExxonMobil: 22.5%
2. Chevron: 14.9%
3. ConocoPhillips: 5.8%
4. Williams Companies: 3.8%
5. SLB: 2.8%

As mentioned, the Vanguard Energy ETF has outperformed the S&P 500 by a substantial margin in 2026, but the opposite has generally been true in recent years. In fact, while the energy sector achieved a total return of 147% (6.2% annually) over the last 15 years, the broader S&P 500 achieved a total return of 574% (13.5% annually).

The Vanguard Energy ETF has a reasonable expense ratio of 0.09%, meaning shareholders will pay $9 per year on every $10,000 invested in the fund. The two largest drawbacks are heavy concentration and slow growth. The top three holdings account for more than 40% of the index fund's performance, and energy companies in aggregate reported declines in revenue and earnings last year.

Is the Vanguard Energy ETF still worth buying?

This year, Brent crude oil futures (the international benchmark) have soared over 50% to $97 per barrel, though prices have been as high as $127 per barrel. Meanwhile, West Texas Intermediate (WTI) crude oil futures (the U.S. benchmark) have increased more than 70% to $99 per barrel, but prices have been as high as $114 per barrel. In both cases, oil prices have reached levels last seen in 2022.

However, Wall Street thinks the market has already priced in much of the good news where energy stocks are concerned. Indeed, analysts expect the energy sector to advance just 6% over the next year, which would make it the worst performer of all 11 stock market sectors, according to FactSet Research. Of course, forward projections could change if oil prices remain elevated longer than anticipated. But I think investors should look elsewhere.

That raises the question: Where does Wall Street see the most potential upside? In the next year, analysts estimate the technology sector will advance 34%. That would make it the best-performing stock market sector.

Investors can get diversified exposure to technology stocks through the Invesco QQQ Trust, an index fund that tracks the 100 largest non-financial companies listed on the Nasdaq Composite. History says now is a good time to buy because the Nasdaq recently slipped into market correction territory, but the index has usually recouped its losses fairly quickly.

Alternatively, investors can get exposure to the technology sector through a variety of Vanguard index funds, including the Vanguard Information Technology ETF. However, I think the Vanguard S&P 500 Growth ETF and the Vanguard Mega Cap Growth ETF are more attractive because they are slightly less concentrated. Both index funds will split their shares later this month, making prices more affordable for prospective investors.

Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron and FactSet Research Systems. The Motley Fool recommends ConocoPhillips. The Motley Fool has a disclosure policy.