Megacap technology stocks have been leading the market higher, and the odds of that happening again next year are high. As such, the Vanguard Growth ETF (VUG +1.89%) and the Invesco QQQ Trust (QQQ +2.06%) are both well positioned to once again outperform the S&P 500 in 2026.
Despite a few pauses along the way, this market has been powered by growth stocks, especially those tied to artificial intelligence (AI). Nvidia (NVDA +5.93%) has been one of the biggest winners, as it's grown to become the largest company in the world with its graphics processing units (GPUs) powering the AI infrastructure boom. Meanwhile, cloud computing leaders, such as Microsoft (MSFT +0.66%), Amazon, and Alphabet, have all benefited from insatiable growth coming from AI demand.
They are all cash-rich, entrenched companies that have built scale and network effects that competitors will struggle to catch. They're also the heaviest-weighted stocks in the market-cap-weighted growth exchange-traded funds (ETFs), which is why the Vanguard Growth ETF and Invesco QQQ Trust have done so well when tech has been in the driver's seat. Both are built to let their winners run, and both have consistently delivered better returns than the S&P 500 over the past decade.
Even at record highs, I wouldn't sit on the sidelines waiting for a correction. If you try to time a pullback, you risk missing the gains these leaders keep generating. Dollar-cost averaging into these ETFs remains one of the smartest ways to play this trend and stay invested without worrying about short-term swings.
Let's take a closer look at why these ETFs are poised to once again outperform in 2026.
Vanguard Growth ETF
NYSEMKT: VUG
Key Data Points
An investment in the Vanguard Growth ETF is a simple bet that large-cap growth stocks will continue to outperform value stocks. The ETF tracks the performance of the CRSP US Large Cap Growth Index, which is essentially the growth side of the S&P 500.
Its top 10 holdings are very similar to the S&P 500, but you're getting these stocks in a much higher concentration, since it doesn't hold any value stocks. The fund's top 10 holdings make up more than 60% of its portfolio, compared with less than 40% for the S&P 500 itself. Meanwhile, over 60% of its holdings are in tech stocks, while a third of the S&P is made up of technology names.
That concentration is exactly why it tends to outperform when tech and growth stocks lead the market. It has been outpacing the broader index for years. Over the past decade, it's generated an average annual return of 18% compared to 15.3% for the S&P 500. While that may not sound like a lot, with a $10,000 investment, that would be the difference between an ending balance of around $52,300 versus $41,500 for an ETF that tracks the S&P 500.
Image source: Getty Images.
Invesco QQQ Trust
NASDAQ: QQQ
Key Data Points
Another ETF that looks well positioned to outperform the S&P 500 again in 2026 is the Invesco QQQ Trust. It tracks the Nasdaq-100, which focuses on the largest non-financial names on the Nasdaq exchange. The result is a tech-heavy growth fund where more than 60% of its assets sit in technology and much of the rest is in other growth areas.
Just like the S&P 500, the Nasdaq-100 is a market-cap-weighted index that is designed to let its winners run. So, when stocks like Nvidia and Microsoft soar, they naturally become a larger part of the ETF without any manager stepping in to rebalance. That means the fund rewards its winners and automatically reduces exposure to companies that fall behind.
The Invesco QQQ Trust's track record is outstanding. Over the past 10 years, it's returned around 20.3% annually, and a $10,000 investment over that period would be worth around $63,600. Even more impressively, the ETF has topped the S&P 500 more than 87% of the time on a 12-month rolling basis over this period.
As such, it's not too bold of prediction that it will once again outperform next year.
