The Vanguard Growth ETF (VUG -0.53%) is one of the most popular exchange-traded funds (ETFs) around, and it's a great choice for many investors. The ETF tracks the performance of the CRSP US Large Cap Growth Index, which includes stocks representing the growth side of the S&P 500.
Notably, the ETF holds around 166 stocks, while its value counterpart, the Vanguard Value ETF (VTV 0.16%), carries 331 stocks, since fewer large-cap stocks are classified as growth stocks. Stocks will also sometimes bounce between the growth ETF and the value ETF. For example, last year, Broadcom was one of the top stocks in the value index, but it has since shifted to being a top-10 holding in the growth ETF.
The Vanguard Growth ETF is very tech-heavy, with such stocks accounting for 58.5% of its portfolio. Its top three -- Microsoft, Nvidia, and Apple -- represent almost 32% of its holdings.
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Growth and technology stocks have been helping lead the market higher for a long time, which can be seen in the outperformance of the Vanguard Growth ETF compared to both the Vanguard S&P 500 ETF (VOO -0.25%) and the Vanguard Value ETF. Over the past decade, as of the end of May, the Vanguard Growth ETF has produced an average annual return of 15.3% versus 12.8% for the Vanguard S&P 500 ETF and 10% for the Vanguard Value ETF.
Overall, the Vanguard Growth ETF is a great option for investors; however, there is one growth-focused ETF I like even more.
The Invesco QQQ Trust
The Invesco QQQ Trust (QQQ -0.46%) has been one of the best-performing non-leveraged or sector-specific ETFs around. This ETF has outperformed both the Vanguard 500 ETF and the Vanguard Growth ETF over the past decade. As of the end of May, it has generated an average annual return of 17.7%, outpacing its rivals.
| ETF | 5-Year Average Annual Return | 10-Year Average Annual Return |
|---|---|---|
| Vanguard Value | 13.9% | 10% |
| Vanguard S&P 500 | 15.9% | 12.8% |
| Vanguard Growth | 17.2% | 15.3% |
| Invesco QQQ Trust | 18.1% | 17.7% |
Source: Vanguard and Invesco websites.
The Invesco QQQ Trust's outperformance against the S&P 500 isn't just due to a couple of big years. It has been able to consistently outdo the benchmark index over the past decade. In fact, during this period, it has outperformed the S&P 500 more than 87% of the time on a rolling-12-month basis. That's impressive.
Like the Vanguard Growth ETF, the Invesco QQQ Trust is also heavily weighted toward tech, with 57.2% of its portfolio classified in that sector as of the end of March. However, the Invesco ETF is actually less top-heavy than the Vanguard Growth ETF, with its top three holdings representing less than 25% of its portfolio (versus almost 32% in the Vanguard ETF). While they share many of the same top holdings, they are more spread out in the Invesco QQQ, which is another reason I prefer it.
Here are the two ETFs' top 10 holdings and their weightings:
| Vanguard Growth | Weighting | Invesco QQQ | Weighting |
|---|---|---|---|
| 1. Microsoft | 11.3% | 1. Microsoft | 8.8% |
| 2. Nvidia | 10.3% | 2. Nvidia | 8.7% |
| 3. Apple | 10.1% | 3. Apple | 7.3% |
| 4. Amazon | 6.3% | 4. Amazon | 5.6% |
| 5. Alphabet | 5.8% | 5. Alphabet | 5% |
| 6. Meta Platforms | 4.4% | 6. Broadcom | 4.8% |
| 7. Broadcom | 4% | 7. Meta Platforms | 3.8% |
| 8. Tesla | 3.3% | 8. Netflix | 3.2% |
| 9. Eli Lilly | 2.2% | 9. Tesla | 2.9% |
| 10. Visa | 2.2% | 10. Costco | 2.7% |
Note: VUG holdings are as of May 31, and QQQ holdings are as of June 17.
Growth investors can't go wrong with either the Vanguard Growth ETF or the Invesco QQQ Trust, although I prefer the latter due to its track record of outperformance and its currently being less top-heavy.
That said, regardless of which ETF you pick, the key to creating long-term wealth will be consistently investing in it using a dollar-cost averaging strategy. In the long run, this is just as important -- or perhaps even more so -- than trying to pick which is the better ETF right now.
