The Vanguard ETF That Could Set You Up for Life Isn’t the One With Higher Returns

For most investors, the broader diversification and lower volatility of the Vanguard S&P 500 ETF (VOO) make it a more reliable core long-term holding than the Vanguard Growth ETF (VUG).

VOO charges an expense ratio of just 0.03% and gives investors exposure to 504 large-cap U.S. companies across tech, healthcare, energy, and consumer goods. The fund tracks the S&P 500, which currently allocates about 33% of its weight to technology stocks. Over the past decade, that exposure has helped VOO deliver a compound annual growth rate of 14.4%.

VUG, by comparison, also charges 0.03% but holds only 151 stocks, with 65% of its portfolio in tech. That concentrated growth tilt delivered a higher 10-year CAGR of 16.4%. But that outperformance comes at a cost: VUG’s standard deviation of daily returns over the same period was 1.35%, noticeably higher than VOO’s 1.13%, signaling greater volatility.

The risk isn’t just in the numbers. Higher volatility increases the chance that investors will panic and sell during steep drawdowns. While both funds can suffer declines of 30% or more in bear markets, VOO’s broader diversification makes it more likely that investors will stay the course. For long-term wealth creation, staying invested matters more than chasing the highest returns. For most people, that makes VOO the smarter core holding.