Vanguard Growth ETF vs. Vanguard Mega Cap Growth ETF: The AI Sell-Off Exposes a Hidden Risk in Both Funds
Two popular funds, the Vanguard Morningstar Growth ETF(NYSEMKT:VUG) and Vanguard Morningstar Mega Cap Growth ETF(NYSEMKT:MGK), offer exposure to America's largest growth companies. However, their similarities may matter more than their differences as the recent sell-off in artificial intelligence (AI) and technology stocks highlights the concentration risks facing growth-oriented investors.
While the broader growth fund holds more than twice as many stocks as its mega-cap counterpart, both remain heavily concentrated in the same technology giants, including Nvidia(NASDAQ:NVDA), Apple(NASDAQ:AAPL), and Microsoft(NASDAQ:MSFT). With Wall Street increasingly questioning elevated AI valuations, investors should consider whether owning more companies actually provides meaningful diversification when the market turns against Big Tech.
Snapshot (cost & size)
| Metric |
VUG |
MGK |
|---|---|---|
| Issuer |
Vanguard |
Vanguard |
| Share price |
$84.03 (as of 2026-11-02) |
$85.65 (as of 2026-11-02) |
| Expense ratio |
0.03% |
0.05% |
| 1-yr return (as of Nov. 2, 2026) |
1.5% |
2.2% |
| Dividend yield |
0.36% |
0.32% |
| Beta |
1.23 |
1.24 |
| AUM |
$221.0 billion |
$32.8 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
Vanguard Morningstar Growth ETF is the more affordable option with a 0.03% expense ratio. While both funds offer similar yields, the growth fund provides exposure to a broader slice of the growth market for a slightly lower cost.
Performance & risk comparison
| Metric |
VUG |
MGK |
|---|---|---|
| Max drawdown (5 yr) |
(35.6%) |
(36.0%) |
| Growth of $1,000 over five years (total return) |
$1,633 |
$1,709 |
What's inside
Vanguard Morningstar Mega Cap Growth ETF focuses on the largest growth companies and tracks a narrow index of roughly 52 holdings. Its largest positions include Nvidia at 13.69%, Apple at 12.53%, and Microsoft at 9.46%. The portfolio is weighted 75.4% toward Technology, 10.61% toward Consumer Discretionary, and 5.44% toward Industrials. Launched in 2007, the fund has distributed $0.30 per share over the past year, translating into an annual yield of approximately 0.35% at its recent $86 share price.
The Vanguard Morningstar Growth ETF offers a slightly broader perspective on the growth space, holding 135 different stocks. Its largest positions are remarkably similar, with Nvidia at 13.48%, Apple at 12.50%, and Microsoft at 9.74%. The sector breakdown mirrors its peer, with 72% in Technology, 12% in Consumer Discretionary, and 7% in Industrials. The fund dates back to 2004, with trailing annual distributions of $0.35 per share, equivalent to a yield of approximately 0.42% at its recent $84 share price.
For more guidance on ETF investing, check out the full guide at this link .
Which looks like the better buy
Despite their different numbers of holdings, these two Vanguard growth ETFs offer remarkably similar exposure. In fact, approximately 87% of their holdings overlap by portfolio weight. That means investors shouldn't expect either fund to provide much protection if the recent weakness across mega-cap technology stocks continues.
Historically, the mega-cap growth fund has delivered slightly stronger long-term returns, benefiting from the dominance of America's largest technology companies. However, the broader growth fund offers exposure to more companies and charges a lower expense ratio of 0.03%, compared with 0.05% for its counterpart. While the cost difference is modest, it matters when the underlying investments are so similar.
For long-term investors, the Vanguard Morningstar Growth ETF looks like the better buy. Its broader holdings and slightly lower fees provide a modest advantage without sacrificing meaningful exposure to the companies driving the AI boom. That said, neither fund offers substantial protection from a prolonged technology downturn, making diversification beyond large-cap growth stocks worth considering.
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RJ Fulton has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Vanguard Morningstar Growth ETF. The Motley Fool has a disclosure policy .
Vanguard Growth ETF vs. Vanguard Mega Cap Growth ETF: The AI Sell-Off Exposes a Hidden Risk in Both Funds was originally published by The Motley Fool
