This Unstoppable Vanguard ETF Will Beat the S&P 500 Again in 2025


The S&P 500 (SNPINDEX: ^GSPC) is having a very strong year, with a 27.3% gain so far. That’s more than twice its average annual return going all the way back to 1957.

However, the Vanguard Growth ETF (NYSEMKT: VUG) is performing even better, with a 30.9% year-to-date gain. That’s because technology stocks are leading the S&P higher in 2024 thanks to trends like artificial intelligence (AI), and this Vanguard exchange-traded fund (ETF) assigns them a much higher weighting.

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The Vanguard ETF actually has a strong track record when it comes to outperforming the S&P 500, beating the index every year (on average) since it was established in 2004.

The technology sector is likely to continue leading the broader market higher, so here’s why I predict the Vanguard ETF will beat the S&P 500 yet again in 2025.

A sculpture of a golden bull standing on a laptop computer.
Image source: Getty Images.

The Vanguard ETF invests exclusively in U.S. large-cap growth companies. It holds 182 stocks from 12 different sectors, but the tech sector represents the largest chunk of its portfolio by far, with a weighting of 58%.

By comparison, the S&P 500 is home to 500 different companies, and the technology sector accounts for 31.7% of its portfolio. That means the Vanguard ETF is far more concentrated, which can lead to some additional risk during periods when tech stocks are underperforming.

The top three holdings in the Vanguard ETF are in the technology sector, and they account for over one-third of the value of its entire portfolio on their own. Its top five holdings are rounded out by Amazon (which is in the consumer discretionary sector) and Meta Platforms (which is in the communication services sector). Their individual weightings relative to the S&P 500 are below:

Stock

Vanguard ETF Weighting

S&P 500 Weighting

1. Apple

11.71%

7.11%

2. Nvidia

10.94%

6.76%

3. Microsoft

10.80%

6.26%

4. Amazon

6.00%

3.61%

5. Meta Platforms

4.70%

2.57%

Data source: Vanguard. Portfolio weightings are accurate as of Oct. 31, 2024, and are subject to change.

Those five companies operate at the forefront of the AI revolution, dominating both the hardware and software sides of this emerging industry. Their stocks have delivered an average return of almost 61% in 2024, led by Nvidia, which has soared by 173% thanks to incredible demand for its AI data center chips:

NVDA Chart
NVDA data by YCharts

Since the Vanguard ETF assigns a higher weighting to those five stocks than does the S&P 500, it’s no surprise it has delivered a better return in 2024.


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