Better Growth ETF: Vanguard’s VOOG Targets S&P 500, Not State Street’s Small-Cap-Focused SLYG

Vanguard S&P 500 Growth ETF (VOLUME 1.42%) offers low-cost exposure to large-cap technology leaders while State Street SPDR S&P 600 Small Cap Growth ETF (SLAY 0.67%) targeted at small companies with high growth rates.

Investors choosing between these funds are choosing between the stability of large-cap companies and the potential of small-cap companies. While Vanguard’s fund tracks the growth segment of the S&P 500, State Street’s fund focuses on the growth segment of the S&P SmallCap 600. Both funds target capital growth with very different approaches to market capitalization.

Snapshot (cost and size)

Beta measures price volatility relative to the S&P 500; Beta is calculated based on five years of monthly returns. The 1-year return represents the total return over the last 12 months. The dividend yield is the distribution yield over the last 12 months.

The Vanguard fund is a more affordable option, with an expense ratio of 0.07% compared to 0.15% for the State Street fund. While SLYG offers slightly higher payouts, neither fund is designed primarily for income-seeking investors.

Comparison of performance and risks

What’s inside

The Vanguard S&P 500 Growth ETF is heavily concentrated in technology (52%), followed by communications services (16%) and consumer staples cyclicals (9%). His portfolio of 212 holdings includes huge positions in Nvidia (NVDA 1.97%) by 13.64%, Microsoft (MSFT 1.67%) at 7.80%, and Apple (AAPL +0.26%) at 5.98%. It was launched in 2010. The Vanguard S&P 500 Growth ETF paid $0.37 per share over the last 12 months, which at the recent share price of ~$83.33 equates to a yield of 0.5%.

The State Street SPDR S&P 600 Small Cap Growth ETF offers a more balanced sector profile with Industrials at 19%, Technology at 18% and Healthcare at 17%. His largest positions among 350 holdings include Brightspring Medical Services (BTSG +3.80%) at 1.24%, Viasat (VSAT +4.03%) at 1.07%, and Form factor (FORM 1.44%) at 1.02%. It was launched in 2000. The State Street SPDR S&P 600 Small Cap Growth ETF paid $0.76 per share over the last 12 months, which at a recent share price of ~$116.16 equates to a yield of 0.7%.

For more advice on investing in ETFs, check out our full guide here.

What does this mean for investors?

Growth stocks play a key role in an investment portfolio because they can increase returns. The Vanguard S&P 500 Growth ETF (VOOG) and State Street SPDR S&P 600 Small Cap Growth ETF (SLYG) offer powerful ways to highlight high-growth companies, but they target very different areas of the stock market. Choosing between them comes down to which fund is best suited to achieve your investment goals.

VOOG’s focus on growth stocks in the S&P 500 has led to an overconcentration of holdings in the technology sector. The rise of artificial intelligence has led to huge gains in tech stocks. For example, shares Micron TechnologyVOOG’s seventh-largest holding is up more than 600% over the past year as of July 15.

However, the result is that VOOG becomes very unstable. Artificial intelligence is an emerging technology and this is leading to periodic investor sell-offs of the stock, contributing to VOOG’s higher beta and maximum five-year drawdown. VOOG is the choice for those who want to add blue-chip growth stocks to their portfolio and are not afraid of volatility.

SLYG is ideal for investors who already have holdings in the S&P 500 Index and want to diversify their portfolio. ETFs hold stocks that aren’t household names, so investors can benefit from exposure to smaller, growth companies that they might not otherwise encounter. SLYG also doesn’t have as much exposure to the technology industry, which helps support the fund’s performance amid a downturn in that sector.