Better Growth ETF: Vanguard's MGK vs. iShares' IWO
Key Points
MGK carries a much lower expense ratio and holds far fewer stocks than IWO.
MGK delivered a much stronger five-year return and shallower drawdown, but its portfolio is heavily tilted toward technology giants.
IWO’s small-cap focus brings higher volatility and broader sector exposure compared to MGK’s concentrated mega-cap lineup.
- These 10 stocks could mint the next wave of millionaires ›
The iShares Russell 2000 Growth ETF (NYSEMKT:IWO) and Vanguard Mega Cap Growth ETF (NYSEMKT:MGK) differ sharply on cost, portfolio concentration, and sector tilt, with MGK offering a more affordable route to mega-cap tech exposure, and IWO targeting small-cap growth across a wider set of industries.
Both funds aim to capture U.S. growth stocks, but IWO zeroes in on small-cap companies, while MGK targets the largest growth names in the market. This match-up pits diversification and volatility against concentration and efficiency, making the choice highly dependent on what kind of growth exposure may appeal to an investor’s strategy.
Snapshot (cost & size)
| Metric | IWO | MGK |
|---|---|---|
| Issuer | IShares | Vanguard |
| Expense ratio | 0.24% | 0.07% |
| 1-yr return (as of 2025-12-18) | 12.2% | 18.0% |
| Dividend yield | 0.65% | 0.37% |
| Beta | 1.40 | 1.20 |
| AUM | $13.23 billion | $32.68 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.
MGK is more affordable than IWO on fees, with an expense ratio that is 0.17 percentage points lower. IWO also pays a slightly higher dividend yield, but both ETFs offer very modest payouts.
Performance & risk comparison
| Metric | IWO | MGK |
|---|---|---|
| Max drawdown (5 y) | -42.02% | -36.01% |
| Growth of $1,000 over 5 years | $1,128 | $2,019 |
What's inside
MGK focuses tightly on just 69 mega-cap stocks, with a striking 71% allocation to technology and its top three holdings — Apple (NASDAQ:AAPL), NVIDIA (NASDAQ:NVDA), and Microsoft (NASDAQ:MSFT) — collectively making up over a third of the fund. This concentrated approach has delivered robust historical returns, but the portfolio is dominated by the very largest U.S. growth companies. The fund has an 18-year track record and no unusual structural quirks.
IWO, by contrast, spreads its bets across more than 1,000 small-cap growth stocks, with sector weights of 25% technology, 22% healthcare, and 21% industrials. Its top holdings — Credo Technology Group Holding (NASDAQ:CRDO), Bloom Energy Class A (NYSE:BE), and Fabrinet (NYSE:FN) — each account for just over 1% of assets, reflecting a far less concentrated approach. This broader exposure brings higher volatility but may appeal to those seeking diversification beyond mega-cap tech.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
The iShares Russell 2000 Growth ETF (IWO) and Vanguard Mega Cap Growth ETF (MGK) both focus on stocks designed to deliver growth, but MGK has performed well of late thanks to the rise of artificial intelligence. Two of its biggest holdings, Nvidia and Microsoft, have benefited greatly from the AI market's rapid expansion.
This boon also means MGK is vulnerable should the current AI expansion start to slow down. With over 70% of the fund's holdings in tech, MGK lacks the diversification that IWO provides, and that can lead to poor performance if technology stocks undergo a decline. However, MGK's larger AUM gives it more liquidity than IWO.
IWO is far more diversified, which cushions it from a downturn in a particular sector. But because the fund targets small-cap stocks, it possesses greater risk than MGK. This can be seen in its higher max drawdown compared to MGK.
The decision to invest in IWO or MGK comes down to whether an investor prefers MGK's concentration in a handful of mega-cap tech stocks and far lower expense ratio, or IWO's more volatile small-cap approach but greater diversification.
Glossary
Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.
ETF (Exchange-Traded Fund): An investment fund traded on stock exchanges, holding a basket of assets like stocks or bonds.
Mega-cap: Companies with extremely large market capitalizations, typically over $200 billion.
Small-cap: Companies with relatively small market capitalizations, generally between $300 million and $2 billion.
Dividend yield: Annual dividends paid by a fund or stock, expressed as a percentage of its current price.
Beta: A measure of an investment's volatility compared to the overall market, usually the S&P 500.
AUM (Assets Under Management): The total market value of assets managed by a fund or investment company.
Max drawdown: The largest percentage drop from a fund’s peak value to its lowest point over a specific period.
Sector exposure: The proportion of a fund’s assets invested in particular industry sectors, such as technology or healthcare.
Portfolio concentration: The degree to which a fund’s assets are allocated to a small number of holdings.
Growth stock: A stock expected to grow earnings or revenue faster than the overall market.
Diversification: The investment strategy of spreading assets across various holdings to reduce risk.
Where to invest $1,000 right now
When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 974%* — a market-crushing outperformance compared to 193% for the S&P 500.
They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.
See the stocks »
*Stock Advisor returns as of January 1, 2026.
Robert Izquierdo has positions in Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. 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.
Recommended Articles
