How Do the Vanguard S&P 500 Growth ETF and the State Street Small Cap Growth ETF Compare?

The choice between Vanguard S&P 500 Growth ETF (NYSEMKT:VOOG) and State Street SPDR S&P 600 Small Cap Growth ETF (NYSEMKT:SLYG) hinges on whether an investor prefers large-cap stability and tech dominance or the potential higher volatility of small-cap growth.

These two funds target opposite ends of the market capitalization spectrum. While both prioritize growth factors, they operate in different universes: one captures the titan companies of the U.S. economy, and the other focuses on smaller firms with high expansion potential. This analysis compares their costs, risk profiles, and portfolios.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Vanguard S&P 500 Growth ETF is the more affordable option with an expense ratio of 0.07%, which is less than half of the 0.15% charged by the State Street fund. While both offer modest income, the yield gap reflects their primary focus on capital appreciation.

Performance & risk comparison

What's inside

The Vanguard S&P 500 Growth ETF holds 212 stocks and is heavily tilted toward technology at 52%, communication services at 16%, and consumer cyclical at 9%. Its largest positions include NVIDIA Corp (NASDAQ:NVDA) at 13.64%, Microsoft Corp (NASDAQ:MSFT) at 7.80%, and Apple Inc (NASDAQ:AAPL) at 5.98%. The fund was launched in 2010. It has paid $0.37 per share over the trailing 12 months, which, at its recent ~$80.29 share price, yields 0.4%.

In contrast, the State Street SPDR S&P 600 Small Cap Growth ETF targets smaller firms with top holdings including Viasat Inc (NASDAQ:VSAT) at 1.15%, Corcept Therapeutics Inc (NASDAQ:CORT) at 1.06%, and Alkermes Plc (NASDAQ:ALKS) at 1.01%. This fund holds 350 positions, with a more balanced sector mix: industrials at 19%, technology at 18%, and healthcare at 17%. It was launched in 2000. It has paid $0.76 per share over the trailing 12 months, which, at its recent ~$114.58 share price, yields 0.7%.

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Which is the better buy

The Vanguard S&P 500 Growth ETF (VOOG) and the State Street SPDR S&P 600 Small Cap Growth ETF (SLYG) are both growth-oriented exchange-traded funds (ETFs), they employ very different strategies to deliver returns for investors. Let’s look at each fund individually.

First, there’s VOOG. This fund is loaded with tech megacap stocks. Indeed, just three stocks — Apple, Microsoft, and Nvidia — account for about 27% of the fund’s holdings. As for sectors, technology (67% of total holdings) is the largest, followed by financials (9%) and consumer durables (2%). Overall, the fund is almost entirely focused on the U.S. stock market, with more than 98% of all holdings in U.S. stocks. As for performance, VOOG has generated a total return of 385% over the last 10 years, with a compound annual growth rate (CAGR) of 17.1%. Both figures are outstanding and surpass the benchmark S&P 500, which has delivered a total return of 300%, equating to a CAGR of 14.9% over the same period. As for fees, VOOG has a low expense ratio of 0.07%.

Then, there’s SLYG. Unlike its counterpart, SLYG focuses on the small and mid cap growth sector. Rather than targeting tech giants, SLY invests in much smaller companies with market caps under $10 billion. For context, Microsoft has a market cap of $2.8 trillion, meaning SLYG’s holdings are very different from those in the VOOG portfolio. For example, SLYG's top sector holdings are technology (22%), followed by financials (21%) and manufacturing (9%). Turning to performance, the fund has delivered a total return of 182% over the last 10 years, with a CAGR of 10.9%. While this isn’t terrible by any means, the fund has underperformed the benchmark, the S&P 500, and fallen well short of VOOG’s returns. SLYG also has a slightly higher expense ratio at 0.15%.

In summary, these two funds are both acceptable choices for investors seeking exposure to the growth sector of the stock market. However, VOOG beats SLYG on both performance and fees. Yet, for investors seeking diversification away from the tech megacaps, SLYG offers a viable alternative.

Jake Lerch has positions in Nvidia. The Motley Fool has positions in and recommends Alkermes Plc, Apple, Corcept Therapeutics, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.