The S&P 500 (^GSPC +0.43%) tracks about 500 of the largest U.S. public companies, and is widely considered the most important index in the stock market. That's why its performance is often used to gauge if a stock or exchange-traded fund (ETF) had a good year.
We can't predict how a stock or ETF will perform, but there's one Vanguard ETF that has consistently outperformed the S&P 500 that's poised to keep it going: the Vanguard Growth ETF (VUG +0.25%). In 2025, the fund rose 18.9%, outperforming the S&P 500's 16.4% gain.
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Focusing on growth stocks
The Vanguard fund mirrors the CRSP US Large Cap Growth Index, which tracks the companies that account for 85% of the U.S. stock market's value and selects those with faster-growing sales and profits than their industry average. It currently holds 151 companies.
NYSEMKT: VUG
Key Data Points
Since the ETF is weighted by market cap, larger companies make up a greater share than smaller ones. This has made the fund tech-heavy (65.8% of the ETF), but those have been the best-performing growth stocks on the market during the past decade.
In that time, the Vanguard Growth fund has gained 390%, compared to the S&P 500's 265%.
A lot is riding on the "Magnificent Seven" stocks
The "Magnificent Seven" stocks account for close to 58% of the fund, so whether it outperforms depends heavily on how they perform as a group. Below is a list of their weighting in the fund:
- Nvidia: 12.7%
- Apple: 11.9%
- Microsoft: 10.6%
- Alphabet (Class A): 5.4%
- Amazon: 4.6%
- Alphabet (Class C): 4.3%
- Meta Platforms (Class A): 4.3%
- Tesla: 3.8%
There's real concern that Magnificent Seven stocks are overvalued, and the risk of a correction is high. However, there are tech tailwinds happening that could drive them to a better 2026. In 2025, only Nvidia and Alphabet outperformed the S&P 500, rising 39% and 65%, respectively.
If investors begin seeing revenue growth and tangible returns from increased artificial intelligence (AI) spending, the Magnificent Seven is in good shape. If investors get impatient (which they tend to do), we could see them struggle.
Par for the course
The Vanguard Growth fund has outperformed the S&P 500 in 15 of its 22 years on the market. That doesn't mean it will this year, but in the seven years it underperformed, there was one common theme: Investors preferred value stocks to riskier growth stocks.
With the expected growth of AI infrastructure, cloud computing services, digital advertising, and potential cuts in interest rates, this fund is positioned to continue its outperformance streak.
