It's hard to beat the market, especially when it's doing well. S&P Global provides an annual "scorecard" of how large-cap mutual funds perform in comparison with the S&P 500, and nearly every year, most mutual funds underperform. In 2025, for example, 79% of funds underperformed when the S&P 500 gained more than 16%.
When the market is thriving, it's driven by growth stocks, and many growth-focused exchange-traded funds (ETFs) are, in fact, outperforming the market right now.
High-growth tech stocks and ETFs also fall harder in bear markets, but over time, since there are more and longer bull markets than bear markets, many growth ETFs come out on top. Consider the Vanguard Information Technology ETF (VGT -0.95%). It's up 23% year to date, more than double the S&P 500. Here's why that should continue this year and beyond.
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The top names in tech
The Vanguard Information Technology ETF is full of the top names in tech, and today, that means artificial intelligence (AI). However, it's been around since 2010, and its components change as trends change. VGT tracks the MSCI US Investable Market Information Technology 25/50 Index. This index requires that at least 80% of assets go to U.S. technology stocks, including large-, mid-, and small-cap companies across software, hardware, and semiconductors. Since it's a weighted passive index fund, its components are determined by the index and weighted accordingly.
The top five components are Nvidia, Apple, Microsoft, Micron Technology, and Broadcom, which together represent nearly half of the total. That gives investors broad exposure to technology without the risk of investing in a single stock. That could be riskier than having components equally weighted, but the risk is minimized by having 321 components in total.
The risk is also reduced by the model, because stocks will be bought and sold as they grow or lose value; shareholders can feel assured knowing that a losing stock will be sold off, either in part or in total, if it doesn't meet the criteria for belonging.
Long-term growth
The Vanguard ETF is one of the company's best-performing ETFs since inception, and the absolute best performer over the past 10 years, with a 25.6% annuallized 10-year return.
As AI continues to dominate technology and AI stocks continue to soar, the ETF is likely to keep outperforming this year. If the AI cycle continues, which is expected, the ETF should keep outperforming.
The danger for investors is when there's a downturn. It will happen at some point, and the Information Technology ETF is likely to underperform in a big way when it does. Investors in this ETF should keep a long-term investing approach and be able to hold on when the going gets tough for maximum success.
