- VUG Current Price: $ (as of )
- MGK Current Price: $ (as of )
- VUG Expense Ratio: 0.04%
- MGK Expense Ratio: 0.07%
- Mega-Cap Definition: Market capitalization over $200 billion
The core distinction between VUG and MGK lies in their market capitalization focus and, consequently, their diversification. VUG, the Vanguard Growth ETF, tracks the CRSP US Large Cap Growth Index, providing exposure to a broader universe of large-capitalization growth stocks, encompassing approximately 160 holdings. In contrast, MGK, the Vanguard Mega Cap Growth ETF, specifically targets the CRSP US Mega Cap Growth Index, concentrating on companies with market capitalizations generally exceeding $200 billion, resulting in a more concentrated portfolio of around 66-69 companies. This means MGK represents a more focused bet on the performance of a smaller number of dominant, often technology-heavy, mega-cap giants like NVIDIA, Apple, and Microsoft, which make up a larger proportion of its assets compared to VUG. While both funds have similar top holdings, MGK’s higher concentration in these top names, with data showing its top three holdings alone comprising 38.26% of the fund versus 33.51% for VUG, can lead to amplified returns during periods when these mega-caps lead the market.
While MGK’s concentrated approach may offer higher upside potential during strong mega-cap rallies, it inherently carries greater concentration risk. The fund’s heavy weighting towards a few technology-driven companies makes it more vulnerable to sector-specific downturns or regulatory shifts impacting these giants. A slowdown or significant correction in just a handful of these top holdings could disproportionately affect MGK’s performance. Furthermore, while MGK has shown marginal outperformance in some periods, such as with a 19.68% return versus VUG’s 18.65%, this comes with higher volatility, as evidenced by MGK’s higher standard deviation (24.50% vs. 23.84%). VUG’s broader diversification across a larger number of large-cap growth stocks, along with its lower expense ratio of 0.04% compared to MGK’s 0.07%, could offer a more stable and cost-efficient path for long-term compounding, especially in market environments where leadership rotates away from the absolute largest companies.
Investors should closely monitor the performance and valuation metrics of the largest technology and growth companies that dominate both ETFs, particularly MGK. Any shifts in market sentiment towards “mega-cap” stocks, changes in interest rate expectations, or antitrust regulatory developments could significantly impact these funds. Additionally, observing the relative performance of large-cap versus mega-cap segments of the market will be crucial. Should market breadth expand, favoring a wider range of large-cap growth companies beyond the very largest, VUG’s broader diversification may offer a more resilient performance. Conversely, continued market concentration in a few dominant tech leaders would likely favor MGK. The expense ratio difference, while small, also compounds over time and should be considered for long-term investment horizons.
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