VUG vs. VOOG: Why the Cheaper Vanguard Growth ETF is Lagging

Investors often focus on expense ratios when choosing Exchange Traded Funds (ETFs), but for growth-focused funds like Vanguard Growth ETF (VUG) and Vanguard S&P 500 Growth ETF (VOOG), this can be a misleading metric. Despite VUG’s lower expense ratio of 0.03% compared to VOOG's 0.07%, VOOG has significantly outperformed VUG year-to-date and over the trailing twelve months. This performance difference is not due to fees but rather the distinct index construction methodologies employed by each fund.

VOOG has delivered approximately 14% year-to-date returns, while VUG has returned around 10%. Over the past year, VOOG is up about 22%, contrasted with VUG’s 16% gain. Both ETFs hold a similar basket of approximately 150 mega-cap growth stocks. The divergence in performance stems from how their respective underlying indexes, the Morningstar US Large Cap Growth Index (for VUG) and the S&P 500 Growth Index (for VOOG), weight these shared holdings.

Index Construction Differences Drive Performance

The key difference lies in the weighting of major tech giants. For instance, VUG allocates a significantly higher weight to Apple (AAPL) at approximately 12.3%, nearly double VOOG’s allocation of 6.4%. Conversely, VOOG holds a slightly larger position in NVIDIA (NVDA) at nearly 14.3% compared to VUG’s 13.3%. Broadcom (AVGO) also has a higher weighting in VOOG (5.9%) than in VUG (4.4%), while Microsoft (MSFT) holdings are nearly identical in both funds.

This disparity in Apple's weighting has been a major factor in VUG’s underperformance in 2026. As Apple has not kept pace with the AI-driven semiconductor stocks that have dominated market gains, VUG's heavier exposure to Apple has acted as a drag on its returns. VOOG, with its reduced exposure to Apple, has been able to capitalize more on the strong performance of companies like NVIDIA and Broadcom, which are central to the current AI boom.

Is VOOG's Lead Sustainable?

While VOOG currently holds an advantage, it's important to recognize that this lead is largely period-specific. The S&P 500 Growth Index methodology tends to favor companies with strong momentum and earnings, which currently benefits AI-related stocks. However, if market dynamics shift and Apple or other large-cap tech stocks regain leadership, VUG's broader exposure through the Morningstar index could lead to a narrowing of the performance gap or even a reversal.

Over a longer five-year horizon, the performance difference between the two ETFs is less pronounced. VOOG has returned approximately 88% over five years, while VUG has gained about 80%. This suggests that the current gap is more a reflection of short-term market trends than a fundamental structural advantage of one ETF over the other. Betting on VOOG's continued outperformance is essentially a bet on the sustained dominance of AI concentration in the market.

Choosing the Right Growth ETF

For investors seeking large-cap growth exposure filtered through the S&P 500's quality metrics and who are comfortable with a higher concentration in semiconductor and AI-related stocks, VOOG might be a suitable choice. VUG appeals to investors who prefer a slightly broader growth universe and prioritize the fee savings, especially for larger investment amounts, while being mindful that its heavier Apple weighting can lead to underperformance in specific market conditions.

Given the significant overlap in their top holdings, holding both VUG and VOOG is generally redundant. Investors should consider choosing one to form the core of their growth allocation. Despite its recent performance lag, VUG, with its substantially larger net assets ($26.5 billion) and continued inflows, demonstrates investor confidence in its long-term strategy, even with a slightly higher fee and Apple's current drag. The four-basis-point fee difference becomes insignificant when faced with a five-percentage-point return gap driven by index methodology.