1 Magnificent Vanguard Growth ETF I'm Buying Hand Over Fist in September

Both the S&P 500 and the S&P 500 Growth index are up more than 13% year-to-date. Actually, the latter's 2026 gain is closer to 14%, confirming that this is another year in which large- and mega-cap growth stocks are delivering for investors.

Fortunately, this isn't a growth-only rally. As investors have heard countless times this year, breadth is widening, meaning segments beyond the largest growth stocks are fanning bullish flames. The "other" club certainly includes small-cap equities. The S&P SmallCap 600 index (the importance of that index will be revealed shortly) is beating the S&P 500 by more than 800 basis points year-to-date.

This Vanguard growth ETF is one to consider in September. Image source: Getty Images.

That's one reason I'm excited about the Vanguard S&P Small-Cap 600 Growth ETF (NYSEMKT: VIOG) in September. The good news there's an array of catalysts that support more upside for this Vanguard ETF going into year-end.

Investigating indexes

As its name implies, the Vanguard funds the S&P SmallCap 600 index, the growth offshoot of the parent gauge mentioned above. Whenever an investor investigates a passive exchange-traded fund (ETF), they must spend a few minutes evaluating the underlying index.

Index 101 is about to commence. For this growth ETF, the choice of index is critical because the S&P SmallCap 600 has a long-standing track record of outperforming its rival, the Russell 2000 index. From 2000 through 2024, the S&P gauge outperformed its competitor in 20 of those calendar years.

Understanding why that happens is easy. Unlike the Russell small-cap index, the S&P gauge mandates that companies have a history of positive earnings before inclusion. That requirement extends to the index tracked by the Vanguard Growth ETF, and it pays off for patient investors as highlighted by a comparison of this fund against a rival that tracks the Russell 2000 Growth index.

VIOG Total Return Level data by YCharts

So while this fund isn't dedicated to the quality factor, it has an element of quality. This can smooth out some of the bumps associated with small-cap investing. Adding to the ETF's appeal for long-term investors is the fact that many small-cap growth stocks struggle to become profitable. There are times when "junk" carries the day in the small stock arena, but it's not a wager that smart investors want to make over the long haul.

No Fed help, no problem

Another reason I'm excited about this Vanguard ETF in September is that the fund and its peers are strutting their stuff amid a challenging interest rate environment. Maybe it's another case of an asset class believed to be sensitive to interest rates decoupling from rates. Still, the reality is that small caps are surging at a time when rates are high, and the Federal Reserve isn't signaling rate cuts.

Typically, elevated rates are viewed as burdensome for smaller companies because many rely on access to capital markets, making them vulnerable to high borrowing costs. The Fed isn't helping small-cap stocks this year. Still, the Vanguard ETF isn't bothered by that scenario, suggesting investors may be focusing on fundamentals, including small-cap earnings growth, rather than monetary policy.

So there's a lot to like about this ETF in September. And with an annual fee of just 0.10%, or $10 on a $10,000 position, this $1.1 billion fund is appropriate for long-term investors seeking some extra growth from smaller stocks.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.