Index mutual funds have been steadily growing in popularity over the years, as investors favor the low-cost and good returns that these passively managed mutual funds have produced. Last year, according to Morningstar, passive funds surpassed active funds in assets and continue to see strong inflows.

With the growth of passive assets, there has been an explosion of index funds and exchange-traded funds (ETFs) on the market that track all the major indexes and various segments within each of them.

When comparing index funds that track the same index, there's not going to be a huge difference in performance, but there is more deviation between index funds that track different indexes. Within the large-cap growth segment, which has consistently beaten the major broad benchmarks over the long term, there are two leading funds that track different indexes -- the Vanguard Growth Index Fund (VIGAX -0.57%) and the USAA Nasdaq-100 Index Fund (USNQX -0.80%).

Which is the better investment?

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Vanguard Growth Index Fund: Stellar returns with minimal fees

The Vanguard Growth Index Fund is one of the largest funds in its class, with about $46.1 billion in assets under management. It tracks the CRSP U.S. Large Cap Growth Index, which includes about 269 large-cap growth stocks with a median market cap of $213 billion. Its 10 largest holdings are Apple, Microsoft, Amazon, Alphabet, Facebook, Visa, Home Depot, Mastercard, NVIDIA, and PayPal, and they make up around 46% of the portfolio. Furthermore, around 44% of the fund consists of stocks in the technology sector, followed by consumer services (19.5%), financial (11.1%), industrials (10.2%), and healthcare (8%) -- with the same weightings as the index.

As for returns, Vanguard Growth Index Fund has a one-year return of 45.3%, a three-year annualized return of 23.4%, a five-year annualized return of 19.7%, and a 10-year annualized return of 18.5%, through Aug. 31. Since its inception in 2000, it has an annualized return of 8.1%. It also has an annual expense ratio of 0.05%.

The fund has an average price-to-earnings (P/E) ratio of 38.8%, an average return on equity of 21.1%, and an earnings growth rate of 20.9%.

USAA Nasdaq-100 Index Fund: Riding the technology wave

The USAA Nasdaq-100 Index Fund is a growth index fund, like its Vanguard counterpart, but there are key differences. The most notable is that this fund, with $3 billion in assets, tracks a different index, the Nasdaq 100. The Nasdaq 100 tracks the 100 largest non-financial stocks that trade on the Nasdaq Index.

In comparison to the Vanguard fund, it is far more concentrated. About 55% of the portfolio is made up of the top 10 holdings, which include Apple, Amazon, Microsoft, Facebook, Alphabet (A and C shares), Tesla, NVIDIA, PayPal, and Netflix. The sector weightings are heavily tech-oriented with about 60% in tech names, including 13.3% in retail-Internet, 13.2% in technology hardware storage, 11.7% in interactive media and services, 11.1% in systems software, and 10.2% in semiconductors.

Consumer services is the next largest sector at about 21%, followed by healthcare (7%), consumer goods (6.6%), and industrials (5.3%).

Launched in 2000, the USAA Nasdaq-100 Index Fund has posted stellar returns in the past year. Year-to-date as of Sept. 8 it's up about 33%. For the one-year period ended Aug. 31, the fund is up 58.4%. It has a three-year annualized return of 27.2%, a five-year annualized return of 23.9%, and a 10-year annualized return of 21.9%. Since its inception in 2000, it has a 7.2% annual return. The annual expense ratio is 0.48%.

Which is the better buy?

These two funds are an interesting comparison because they invest in two different parts of the large-cap growth universe and were launched in the same year. The USAA Nasdaq-100 Index Fund has the better returns over the last 10 years, and currently. It has tapped into the technology sector, which has driven the overall bull market we've seen over the past decade. Longer-term, going back 20 years, the more diversified Vanguard fund has had better returns, more adeptly navigating the tech bust of the early 2000s and the Great Recession. It also has a significantly lower expense ratio.

Which of these index funds you choose to invest in depends on your risk tolerance. While both are obviously growth funds, the USAA fund has more risk as it is more concentrated in the technology sector. The short-term volatility of the tech sector was on display in the past month or so as the fund surged about 11% in August, but then the sector has dropped back about 6% so far in September.

If you have a higher level of risk tolerance, this is a good investment for you. Short-term volatility is just that, short-term. Long-term, the technology sector will likely continue to drive the market in this decade and produce strong returns for this fund. 

If you want more diversification, while maintaining growth, the Vanguard fund might be the better choice. The fund has a lower beta and standard deviation, which are two measures of risk, and it has lower fees and comparable returns that prove to be even better the longer you pull back the lens.