Vanguard Growth ETFs: Should You Invest in VONG or VUG?

Comparing Vanguard Russell 1000 Growth ETF (NASDAQ:VONG) and Vanguard Growth ETF (NYSEMKT:VUG) reveals two low-cost strategies with subtle differences in stock concentration, dividend distributions, and historical price volatility.

Both funds target large-cap U.S. growth stocks, serving as core building blocks for aggressive portfolios. While they share several top holdings, the underlying indexes differ in how they define the growth universe, leading to variations in the number of positions and total annual cost.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Vanguard fund is the more affordable option with its 0.03% expense ratio, though VONG is also very competitively priced at 0.06%.

Performance & risk comparison

What's inside

The Vanguard Russell 1000 Growth ETF holds 387 stocks, providing a wider reach across the large-cap growth spectrum. Its largest positions include Nvidia at 12.9%, Apple at 11.61%, and Microsoft at 8.8%. Approximately 60% of the fund is dedicated to technology, followed by consumer cyclical at 13% and communication services at 12%. The fund, which launched in 2010, paid $0.56 per share over the trailing 12 months.

In contrast, the Vanguard Growth ETF is more concentrated, with 153 holdings and it launched in 2004. Its top holdings include Nvidia at 13.29%, Apple at 12.3%, and Microsoft at 9.08%. The sector allocation tilts more toward technology at 53%, with communication services at 16% and consumer cyclicals at 12%. It has a trailing-12-month dividend of $1.59 per share.

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

What this means for investors

Over the past five years, the VUG and VONG ETFs have posted similar returns, rewarding investors in each fund with near doubles. Although VUG is significantly larger than VONG, they also share several top holdings, including three “Magnificent Seven” market darlings. Their focus on growth names and low expense ratios make both ETFs solid picks for aggressive growth portfolios.

The tradeoff is income — with a focus on stocks with high capital appreciation potential, both ETFs offer relatively low dividend yields, though at 0.51%, VONG pulls slightly ahead in that category.

While both ETFs would be solid additions to a portfolio, the difference may come down to their benchmark indexes. VUG seeks to track the CRSP US Large Cap Growth Index, which includes as many stocks as is necessary to represent the top 85% of the investable market cap of the CRSP US Total Market Index. The Russell 1000 Growth Index, which VONG follows, focuses on Russell 1000 stocks with specific growth characteristics, and generally has more holdings. While many of the holdings overlap, this difference in methodology means VONG can provide greater exposure to mid-cap stocks in addition to large caps.

Sarah Sidlow has positions in Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Vanguard Growth ETF. The Motley Fool has a disclosure policy.