Vanguard Growth ETF vs Small-Cap Growth: Is a Large Cap or Small Cap ETF the Better Choice?

If you’re looking for growth stock ETFs, you have a lot of choices. Investors choosing between Vanguard Growth ETF (VUG 0.65%) and Vanguard Small-Cap Growth ETF (VBK 1.19%) must weigh the massive scale of large-cap tech leaders against the smaller, more diversified growth potential of VBK.

Both funds target growth-oriented U.S. equities but operate at opposite ends of the market-cap spectrum. While VUG focuses on dominant giants, VBK tracks smaller companies that may offer more room for expansion, providing different risk and return profiles within a growth-focused portfolio.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield as of the close of July 1.

VUG is the more affordable option, with a 0.03% expense ratio compared to VBK’s 0.05%. Both funds offer a 0.40% yield, reflecting their common focus on reinvesting earnings for growth rather than distributing income.

Performance & risk comparison

What’s inside

The Vanguard Growth ETF targets large-cap U.S. equities with strong growth potential. It holds 154 stocks and tilts heavily toward technology at 55.9%, communication services at 16.4%, and consumer cyclicals at 11.8%. Its largest positions include Nvidia Corp (NVDA 1.39%) at 13.10%, Apple Inc (AAPL +4.88%) at 12.3%, and Microsoft Corp (MSFT +1.69%) at 9%. It was launched in 2004. Vanguard Growth ETF has paid $0.34 per share over the trailing 12 months, which on its recent $86.17 share price works out to a 0.40% yield.

The Vanguard Small-Cap Growth ETF tracks the CRSP U.S. Small Cap Growth Index, focusing on companies with smaller market capitalizations. It holds 550 stocks, diversifying across technology at 28.5%, industrials at 24.8%, and healthcare at 14.9%. Top holdings include Astera Labs Inc (ALAB 5.87%) at 1.38%, Ciena Corp (CIEN 8.66%) at 1.14%, and Rocket Lab Corp (RKLB +0.32%) at 1.13%. It was launched in 2004. Vanguard Small-Cap Growth ETF has paid $1.53 per share over the trailing 12 months, which, on its recent $362.32 share price, works out to a 0.40% yield.

Which fund is the better buy?

Both of these Vanguard funds offer a diverse portfolio of growth stocks centered almost entirely on the U.S. (about 99% of the holdings in both VUG and VBK are U.S.-listed). Both the expenses and dividend yields are similar as well.

The major differences are in style. VUG is 90% large-cap stocks, mostly a blend of growth and value, with the balance in midcaps. VBK is 56% in small caps, 43% in midcaps, and 1% in large caps. The majority of the portfolio, 58%, is in value stocks, compared to 59% in VUG, which blends value and growth.

If market cap and the style of holdings aren’t differentiators, then performance makes the difference.

Given that small-cap stocks are having their best start to a year since 1991, it’s no surprise that VGK has outperformed VUG year-to-date (21.4% to 6.4%) and the past year (32.7% to 18.1%).

But over the longer term, VUG and its reliance on large-cap stocks, usually preferred by investors, show results. VUG returned 22.9%, 13.2%, and 18% over the 3-year, 5-year, and 10-year time frames. By comparison, the small-cap ETF returned 17.5%, 5.4%, and 12.2% over the 3-, 5-, and 10-year look-backs.

Past results can’t predict the future, of course, but the longer-term outperformance by the Vanguard Growth ETF makes VUG the better buy.

For more guidance on ETF investing, check out the full guide at this link.