Vanguard Mega Cap Growth ETF vs. Russell 1000 Growth ETF: Which Is the Better Buy Right Now?

Investors seeking to capitalize on the dominance of U.S. growth stocks have two primary options within the Vanguard lineup.

While both the Vanguard Mega Cap Growth ETF (NYSEMKT:MGK) and the Vanguard Russell 1000 Growth ETF (NASDAQ:VONG) prioritize companies with strong earnings potential, they differ significantly in how far down the market-cap ladder they reach to build their portfolios.

Here’s how the two stack up on the most important factors.

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.

MGK is the more affordable of the two options, carrying a marginally lower expense ratio. VONG, however, offers a slightly higher dividend yield, which could help counteract the higher fees.

Performance & risk comparison

What's inside

VONG provides exposure to 387 holdings, offering broader exposure to the large-cap growth space. Its sector allocation is heavily weighted toward technology, accounting for around 51% of assets, followed by communication services at 13% and consumer cyclical at 13%, and its largest positions include Nvidia, Apple, and Microsoft.

Launched in 2010, the fund seeks to track the Russell 1000 Growth Index and has a trailing 12-month dividend of $0.56 per share.

By comparison, MGK tracks the CRSP US Mega Cap Growth Index and focuses exclusively on the largest tier of the growth market, resulting in a tighter portfolio of just 59 holdings.

Its sector allocation tilts even more aggressively toward technology at around 56% of assets, while allocating around 18% to communication services and 13% to consumer cyclical. Its top holdings match VONG’s, and it offers a trailing-12-month dividend of $0.29 per share.

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

What this means for investors

VONG is the broader ETF of the two, with more than six times as many holdings as MGK. It covers a larger swath of the large-cap growth segment, while MGK zeros in on mega-cap stocks with growth potential.

Mega-cap stocks are generally defined as those with a market cap of at least $200 billion, compared to the $10 billion threshold for large-cap stocks. MGK’s narrower focus on these industry-leading giants can lead to greater earning potential, but it also comes with increased risk.

MGK has outperformed VONG in both one- and five-year total returns, but it’s also experienced a deeper max drawdown in that time. During periods of market volatility, MGK’s limited diversification could lead to more severe price swings, which not all investors will be comfortable with.

VONG’s broader reach can provide some cushion during market turbulence. Because it’s slightly less focused on tech stocks, it may also experience milder drawdowns if the tech industry stumbles. That said, tech stocks are also famous for their lucrative returns, so a smaller focus on this segment could also result in lower earning potential.

Both funds can be smart buys depending on your goals and risk tolerance. MGK is the higher-risk, higher-reward option for those looking to maximize exposure to industry giants, while VONG offers broader diversification to help limit the risk of investing in large-cap growth stocks.

Katie Brockman has positions in Vanguard Scottsdale Funds - Vanguard Russell 1000 Growth ETF. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.