Better Growth ETF: Vanguard's VOOG Targeting the S&P 500 vs. State Street's Small Cap-Focused SLYG

The Vanguard S&P 500 Growth ETF (NYSEMKT:VOOG) offers low-cost exposure to large-cap tech leaders, whereas the State Street SPDR S&P 600 Small Cap Growth ETF (NYSEMKT:SLYG) targets smaller companies with high growth momentum.

Investors choosing between these funds are deciding between large-cap stability and small-cap potential. While the Vanguard fund tracks the growth segment of the S&P 500, the State Street fund focuses on the growth tier of the S&P SmallCap 600. Both funds target capital appreciation using very different market-capitalization lenses.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-year 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 a 0.07% expense ratio compared to 0.15% for the State Street fund. While SLYG offers a slightly higher payout, neither fund is primarily designed for income-seeking investors.

Performance & risk comparison

What's inside

The Vanguard S&P 500 Growth ETF is heavily concentrated in technology at 52%, followed by communication services at 16%, and consumer cyclical at 9%. Its portfolio of 212 holdings includes massive positions in Nvidia (NASDAQ:NVDA) at 13.64%, Microsoft (NASDAQ:MSFT) at 7.80%, and Apple (NASDAQ:AAPL) at 5.98%. It launched in 2010. The Vanguard S&P 500 Growth ETF has paid $0.37 per share over the trailing 12 months, which on its recent ~$83.33 share price works out to a 0.5% yield.

The State Street SPDR S&P 600 Small Cap Growth ETF offers a more balanced sector profile, with industrials at 19%, technology at 18%, and healthcare at 17%. Its largest positions among its 350 holdings include Brightspring Health Services (NASDAQ:BTSG) at 1.24%, Viasat (NASDAQ:VSAT) at 1.07%, and Formfactor (NASDAQ:FORM) at 1.02%. It launched in 2000. The State Street SPDR S&P 600 Small Cap Growth ETF has paid $0.76 per share over the trailing 12 months, which on its recent ~$116.16 share price works out to a 0.7% yield.

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

What this means for investors

Growth stocks serve a key role in an investment portfolio since they can amplify returns. The Vanguard S&P 500 Growth ETF (VOOG) and the State Street SPDR S&P 600 Small Cap Growth ETF (SLYG) offer efficient ways to gain exposure to fast-growing companies, but target vastly different areas of the stock market. Deciding between the two comes down to which fund is better-suited to helping you achieve your investment goals.

VOOG’s focus on growth stocks among the S&P 500 has led to an outsized concentration of holdings in the technology sector. The rise of artificial intelligence has led to massive gains for tech stocks. For example, shares of Micron Technology, VOOG’s seventh largest holding, rose over 600% in the past year through July 15.

As a result, however, VOOG is very volatile. AI is a new technology, and that has led to periodic investor sell-offs, which contribute to VOOG’s higher beta and five-year max drawdown. VOOG is the choice for those who want to add blue-chip growth stocks to their portfolio and are comfortable with the volatility.

SLYG is ideal for investors who already have holdings within the S&P 500 and want to diversify their portfolio. The ETF contains stocks that are not household names, so investors can benefit from exposure to smaller growth companies they may otherwise not come across. SLYG is also not so reliant on the technology industry, which helps to bolster fund performance from a downturn in that sector.

Robert Izquierdo has positions in Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Apple, Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.