Which Vanguard ETFs Have Beaten Warren Buffett's Favorite ETF Since Inception?

Two Vanguard ETFs, the Russell 1000 Growth Index Fund ETF (VONG) and the S&P 500 Growth Index Fund ETF (VOOG), have outperformed Warren Buffett's favored Vanguard S&P 500 ETF (VOO) since their inceptions in September 2010, boasting average annual returns of 16.4% and 16.01% respectively, compared to VOO's 14.24%. While VONG and VOOG have slightly higher expense ratios and lower dividend yields than VOO, their focus on growth stocks has driven higher returns, though small-cap value stocks may offer superior long-term performance.

Analysis

An analysis of Vanguard ETFs reveals that the Vanguard Russell 1000 Growth ETF (VONG) and the Vanguard S&P 500 Growth ETF (VOOG) have historically outperformed the widely-held Vanguard S&P 500 ETF (VOO) since their respective inceptions in September 2010. VONG has delivered an average annual return of 16.4% and VOOG 16.01%, compared to VOO's 14.24%. This outperformance is attributed to their strategic focus on large-cap growth stocks, which filters out slower-growing members of the broader market indices and results in a more concentrated portfolio of 392 and 212 stocks, respectively. This performance advantage, however, comes with trade-offs: both VONG and VOOG have a higher expense ratio of 0.07% versus VOO's 0.03%, and their dividend yields are substantially lower, with 30-day SEC yields around 0.5% compared to VOO's 1.24%. While the forward-looking perspective suggests these growth-oriented ETFs may continue their outperformance, the analysis also introduces a long-term strategic alternative, noting the historical outperformance of small-cap value stocks over multiple decades, positioning ETFs like VIOV and VBR as potential considerations for future market cycles.

Key Decisions for Investors

• Investors seeking to outperform the S&P 500 and willing to accept a lower dividend yield and slightly higher fees should evaluate VONG and VOOG for their demonstrated history of superior returns driven by a large-cap growth focus.
• For income-focused or cost-sensitive investors, VOO remains the more suitable core holding due to its minimal 0.03% expense ratio and a dividend yield that is more than double that of its growth-focused peers.
• Given the significant overlap in top holdings like Microsoft, Nvidia, and Apple across these ETFs, investors should review their existing portfolio for potential over-concentration in mega-cap technology before allocating new capital.
• Long-term strategic investors should consider the note on historical asset class performance and monitor small-cap value ETFs, such as VIOV and VBR, as potential outperformers in future market regimes that may differ from the recent decade of large-cap growth dominance.