Nvidia (NVDA +0.64%) took the market by storm in 2023 and 2024 -- increasing by several-fold in just two years to become the third most valuable company in the world behind only Apple (AAPL +0.01%) and Microsoft (MSFT 0.22%). But Nvidia and several other megacap growth stocks are underperforming the S&P 500 (^GSPC 0.08%) and Nasdaq Composite (^IXIC +0.08%) in 2025 as fears of an economic slowdown and tariffs rock markets.
Investors looking to boost their exposure to Nvidia could simply buy the stock outright. But another option is to invest in an exchange-traded fund (ETF) that holds Nvidia.
The Vanguard Mega Cap Growth ETF (MGK +0.09%) and the Vanguard Information Technology ETF (VGT +0.42%) are two low-cost ETFs with expense ratios of just 0.07% and 0.09%, respectively. Over 10% of both funds is invested in Nvidia.
Here are some key differences between the two funds and why they are both better buys than the Vanguard S&P 500 ETF (VOO 0.11%) for investors looking for exposure to top growth stocks.
Image source: Getty Images.
Betting on the biggest companies
The Vanguard Mega Cap Growth ETF targets top growth stocks across stock market sectors, whereas the Vanguard Information Technology ETF only invests in tech stocks. Companies like Amazon, Meta Platforms, Alphabet, and Tesla are technically classified outside the information technology sector despite having a reputation for tech-related innovation. As a result, they are excluded from the Information Technology ETF. However, they are top holdings in the Mega Cap Growth ETF.
Due to the sheer size of Apple, Nvidia, and Microsoft, these companies dominate the holdings of both funds -- making up 46% of the Information Technology ETF and 35.9% of the Mega Cap Growth ETF.
|
Vanguard Mega Cap Growth ETF |
Vanguard Information Technology ETF |
Vanguard S&P 500 ETF | |||
|---|---|---|---|---|---|
|
Company |
Weight |
Company |
Weight |
Company |
Weight |
|
Apple |
13.9% |
Apple |
17.9% |
Apple |
7.2% |
|
Microsoft |
11.1% |
Nvidia |
14.9% |
Nvidia |
6.1% |
|
Nvidia |
10.9% |
Microsoft |
13.2% |
Microsoft |
5.9% |
|
Amazon |
7.2% |
Broadcom |
4.2% |
Amazon |
3.9% |
|
Meta Platforms |
5.4% |
Salesforce |
1.8% |
Alphabet |
3.6% |
|
Alphabet |
4.5% |
Oracle |
1.7% |
Meta Platforms |
2.9% |
|
Eli Lilly |
3.4% |
Cisco Systems |
1.6% |
Berkshire Hathaway |
1.9% |
|
Tesla |
3.4% |
IBM |
1.5% |
Broadcom |
1.8% |
|
Visa |
2.7% |
Accenture |
1.4% |
Tesla |
1.6% |
|
Mastercard |
2.1% |
Adobe |
1.2% |
JPMorgan Chase |
1.5% |
Data source: Vanguard.
As you can see in the table, the S&P 500 also has sizable exposure to top growth stocks, but not nearly as much as the two discussed ETFs.
The better buy
Investors looking to maximize their exposure to Nvidia may lean toward the Information Technology ETF, given it has a higher weighting than the Mega Cap Growth ETF. However, it's important to note that the Information Technology ETF has much more exposure to industries like semiconductors, software, and hardware than the Mega Cap Growth ETF. So if you want to buy Nvidia but aren't as interested in other chip stocks like Broadcom or Advanced Micro Devices, Texas Instruments, Qualcomm, Applied Materials, and Micron Technology, then the Information Technology ETF may not be a good fit. However, the Information Technology ETF could be a great buy if you want more exposure to chip stocks to play a boom in artificial intelligence.
The Mega Cap Growth ETF is the better choice if you're looking to invest in Nvidia and other top growth stocks rather than the tech sector specifically. Tech-focused companies dominate the fund, but it also has red-hot growth stocks from other sectors. For example, financial stocks Visa and Mastercard are top holdings. Eli Lilly from healthcare and Costco Wholesale from consumer staples are also major holdings.
Integrating ETFs into an existing portfolio
Before buying an ETF, it's a good idea to look through the fund's holdings to see if there are any duplicates with stocks you already own. For example, if you already own a sizable amount of Apple or Microsoft and don't necessarily want to own more of those stocks, then both funds aren't good buys because they are heavily concentrated in those two stocks. Or if there's a large holding in a stock you don't want to buy, then you may want to search for alternative ETFs.
Instead of focusing on an ETF's composition in a vacuum, it's better to look at how the ETF would fit into your portfolio.
An easy way to calculate your true exposure to any stock is to simply take the investment in the ETF and multiply it by the stock's weighting. For example, if you have a $10,000 portfolio and are looking to invest $2,000 in the Mega Cap Growth ETF, then you're really putting $278 in Apple ($2,000 times 0.1392). Meaning Apple would make up 2.8% of your entire portfolio on the ETF investment alone. If you already have $1,000 invested in Apple, or 10% of your portfolio, then the ETF is actually increasing your exposure to Apple on a percentage basis, which is making the portfolio more concentrated rather than diversified.
Two great buys for risk-tolerant investors
Both ETFs will likely be more volatile than the S&P 500 if the sell-off persists. For example, in 2022, the Nasdaq Composite and both ETFs fell over 30%, whereas the S&P 500 tumbled 19.4%.
Arguably the best reason to buy the Vanguard Mega Cap Growth ETF or the Vanguard Information Technology ETF is if you're looking for general exposure to the largest megacap growth stocks. Because both funds are so top-heavy, they don't provide too much diversification beyond the largest holdings. But if you like most of those top holdings, the ETFs are straightforward ways to buy the dip in the broader Nasdaq correction.
