Many investors might think exchange-traded funds (ETFs) are like the tortoise and the hare in Aesop's fable about the race between these two unlikely competitors. In their view, ETFs can win the race over the long term by plodding along slowly but steadily.

This stereotype might be true for some ETFs. However, there are exceptions. One Vanguard ETF has skyrocketed 40% over the last 12 months.

A mega winner

Which ETF has turned in such an impressive performance? The Vanguard Mega Cap Growth Index Fund ETF (MGK 0.25%). As its name implies, this Vanguard fund owns mega-cap stocks (ones with market caps of $200 billion or more) with exceptional growth prospects.

The Vanguard Mega Cap Growth Index Fund ETF currently holds positions in 82 stocks. The median-market cap of these stocks is $1.3 trillion. The stocks in the ETF's portfolio have delivered an average annual-earnings growth over the last five years of 19%.

Despite the huge return over the last 12 months, this Vanguard ETF didn't begin its winning ways recently. Since its inception in December 2007, the fund has generated an average-annual return of 12.72%. Over the last five years, it has increased by an average of 19% annually.

You won't have to worry about expenses eating into your gains much with the Vanguard Mega Cap Growth Index Fund ETF. Its annual-expense ratio is a low 0.07%. The average-expense ratio of similar funds is more than 13 times higher at 0.96%.

Why this Vanguard ETF continues to soar

There's a simple reason why this Vanguard ETF has risen so much and continues to soar. Many of the stocks it owns have been sizzling hot.

For example, Microsoft is the largest holding for the Vanguard Mega Cap Growth Index Fund ETF. Shares of the technology giant are up nearly 50% over the last 12 months, fueled by a generative AI boom.

AI has been a key driver for several other top stocks in the ETF. Its third-largest position, Amazon, has jumped over 80%. Shares of Nvidia, the ETF's fourth-biggest holding, have more than tripled in value. No. 5, Meta Platforms, has vaulted close to 140% higher. No. 6, Alphabet, is up nearly 45%.

The Vanguard Mega Cap Growth Index Fund ETF doesn't only own tech stocks. Drugmaker Eli Lilly ranks as the fund's sixth-largest holding. This big pharma stock has more than doubled over the last 12 months.

Is the Vanguard Mega Cap Growth Index Fund ETF a no-brainer buy?

With its strong momentum, the Vanguard Mega Cap Growth Index Fund ETF might seem like a no-brainer buy right now. Is it? I wouldn't go that far. There are two potential drawbacks to keep in mind.

First, valuation could become an issue with the ETF. The average price-to-earnings ratio for stocks in the fund's portfolio is a sky-high 38.3. Granted, many of the stocks owned by the ETF are growing rapidly. Still, a cursory glance at the forward-earnings multiples of the ETF's top holdings reveals that they're not cheap.

Second, the Vanguard Mega Cap Growth Index Fund ETF doesn't provide as much diversification as many other Vanguard ETFs do. A whopping 58.7% of the fund is invested in tech stocks. Another 21.2% is in consumer-discretionary stocks. This concentration in two sectors could be problematic during an economic downturn.

I think this Vanguard ETF is nonetheless a great pick for long-term investors. You'll still need to use your brain before buying it, though.