VOO vs. MGK: Is S&P 500 Diversification or Mega-Cap Growth the Better Buy for Investors?

Both the Vanguard Mega Cap Growth ETF (NYSEMKT:MGK) and the Vanguard S&P 500 ETF (NYSEMKT:VOO) are passively managed Vanguard funds aimed at U.S. large-cap equity exposure, but their strategies differ: MGK tilts toward high-growth mega-cap stocks, while VOO mirrors the full S&P 500.

This comparison examines cost, returns, risk, sector tilt, and portfolio construction to help clarify which approach may be more appealing, depending on an investor's priorities.

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 charges a lower expense ratio and offers a notably higher dividend yield, making it more affordable for cost- and income-conscious investors.

Performance & risk comparison

What's inside

VOO holds 505 stocks and tracks the S&P 500, offering a cross-section of the largest U.S. companies. Its sector allocation is led by technology (37% of total assets), financial services (13%), and consumer cyclicals (11%).

Its top holdings include Nvidia, Apple, and Microsoft, but no single sector or company dominates the way it does in some growth-tilted funds.

MGK, in contrast, is much more concentrated, with just 66 holdings and a heavy technology tilt (58%), followed by communication services (15%) and consumer cyclical (12%).

Its top three positions match VOO's, but they make up a larger portion of the portfolio. This can drive outperformance in strong tech markets, but it also amplifies risk if the sector stumbles.

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What this means for investors

VOO is a broad-market fund tracking the S&P 500, offering plenty of diversification across sectors and individual holdings. It contains around seven times more holdings than MGK, with less of a tilt toward technology stocks -- which can result in more stability and milder drawdowns during periods of market volatility.

MGK, on the other hand, is much more focused on targeted growth. With only a fraction of the holdings of VOO, it's less diversified with a heavier tilt toward tech stocks.

This lack of diversification can be both a strength and a weakness for MGK. Both funds share the same top three holdings, but those stocks make up around 38% of MGK's portfolio compared to around 22% for VOO. When those particular stocks are thriving, MGK can significantly outperform VOO. But if they stumble, MGK will be hit harder.

This also makes MGK more prone to volatility, as seen with its higher beta and steeper max drawdown over the last five years. While it's ultimately outperformed VOO with higher one- and five-year total returns, it's been a bumpier ride along the way.

Investors who are more comfortable with risk in exchange for higher potential earnings may prefer MGK, while risk-averse investors may favor VOO's long-term consistency and stability.

Glossary

ETF: Exchange-traded fund; a pooled investment that trades on stock exchanges like a single stock.
Expense ratio: Annual fee, as a percentage of assets, that investors pay to cover a fund’s operating costs.
Dividend yield: Annual dividends paid by a fund divided by its current price, shown as a percentage.
Beta: A measure of an investment’s volatility compared to the overall market; 1.0 matches market volatility.
AUM: Assets under management; the total market value of assets a fund manages on behalf of investors.
Max drawdown: The largest observed percentage drop from a fund’s peak value to its lowest point over a period.
Total return: The investment’s price change plus all dividends and distributions, assuming those payouts are reinvested.
Sector allocation: The percentage of a fund’s assets invested in different industry sectors.
Growth stocks: Shares of companies expected to grow faster than the market average, often reinvesting profits instead of paying dividends.
Liquidity: How easily an asset can be bought or sold in the market without affecting its price.
Portfolio construction: The process of selecting and weighting assets within an investment fund to meet specific goals.
Drawdown: A decline in investment value from a peak to a trough, before a new peak is achieved.

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.