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Vanguard Growth Index Fund ETF Shares

VUG:NYSEArca

equity ETF | passive | Vanguard | Tracks CRSP US Large Cap Growth Index

Market Price

US$486.78 (26 Jan 2026)

+14.24% (YoY)

NAV

US$483.44

+0.69% Premium

Yield

0.41%

0.00% (YoY)

Expense Ratio

4.00%

-89% vs Avg: 35.00%

Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF tracks a broadly diversified index predominantly made up of growth stocks of large U.S. companies. With its razor-thin expense ratio and tight tracking, VUG offers efficient access to the large-cap U.S. growth segment. Our bull case projects NAV reaching US$584.14 (+20%) while the bear case suggests US$389.42 (-20%) over 12-18 months.

⚖️ Risk vs Reward

The underlying large-cap growth holdings within VUG trade at elevated valuations, with a P/E ratio of 39.3x and a P/B ratio of 12.7x, both near the high end of their historical 10-year ranges. This positions the ETF's holdings at a premium compared to the broader market, indicating a potentially asymmetric risk/reward profile. While the sector has demonstrated robust earnings growth, driven by key mega-cap technology names, it remains sensitive to interest rate fluctuations and regulatory pressures. The upside potential is tied to sustained innovation and market leadership, but a significant valuation compression event or an economic downturn could lead to notable downside, amplifying the inherent volatility of growth equities. Despite its low expense ratio and minimal tracking error, the fund's concentration in a few top holdings adds to its specific risk profile.

🚀 Why VUG Could Soar

• Continued technological innovation and AI adoption could fuel robust earnings growth for VUG's heavily weighted tech holdings, driving share prices higher.
• A sustained period of declining interest rates would improve the valuation multiples for growth stocks, which are sensitive to future earnings discount rates.
• Increased corporate spending and consumer confidence could boost revenue and profitability for large-cap growth companies, extending the current market rally.

⚠️ What Could Go Wrong

• Elevated valuations (P/E 39.3x, P/B 12.7x) could trigger a significant multiple compression if earnings growth decelerates or investor sentiment shifts.
• Regulatory scrutiny and antitrust actions against mega-cap technology companies could negatively impact the performance of VUG's most concentrated holdings.
• A slowdown in global economic growth or a recession could reduce corporate earnings, leading to sharp declines in growth stock prices and overall ETF value.

🏢 Fund Overview

What Are You Actually Buying

The U.S. large-cap growth equity market consists of large U.S. companies (typically with market capitalizations in the trillions) that are expected to grow their earnings and revenues at a faster rate than the broader market.
These companies often reinvest heavily in research and development, have strong brand recognition, and typically operate in dynamic sectors such as technology, communication services, and consumer cyclical.
VUG specifically targets companies exhibiting growth characteristics based on factors such as expected and historical earnings growth, sales growth, investment-to-assets ratio, and return on assets.
Investors in this segment typically prioritize capital appreciation over current income and should be prepared for higher volatility compared to value-oriented or broader market investments.

Market Dynamics & Outlook

The large-cap growth sector currently trades at a significant premium to the broader market, with a P/E ratio of 39.3x and a P/B ratio of 12.7x as of December 31, 2025, driven by strong earnings growth of 31.2% in its underlying holdings.
Mega-cap technology companies, heavily represented in VUG, continue to lead market performance, largely due to ongoing innovation in artificial intelligence and cloud computing.
Despite robust fundamentals, the sector faces headwinds from potential regulatory actions, particularly against dominant technology platforms, and sensitivity to higher-for-longer interest rate environments.
Investor sentiment remains largely positive, but a shift towards value or defensive sectors could occur if economic growth slows or inflation proves persistent.

🎯 Why This Matters

Understanding the large-cap growth sector's current valuation and concentration is critical, as a handful of mega-cap stocks increasingly dictate the performance of the entire segment. While these companies exhibit strong innovation and earnings power, their premium valuations leave them vulnerable to shifts in economic outlook or regulatory changes. For investors, this creates both substantial growth opportunities and concentrated risk exposures.

📈 Valuation & Analysis

Historical Performance

YTD

-0.91%

+19.44%

Yearly Growth (3Y)

+32.50%

Yearly Growth (5Y)

+14.63%

Yearly Growth (10Y)

+17.45%

Yearly Growth (Since Inception)

+12.05%

Current Valuation

The Vanguard Growth Index Fund ETF's underlying holdings currently trade at an aggregate price-to-earnings (P/E) ratio of 39.3x and a price-to-book (P/B) ratio of 12.7x, as of December 31, 2025. These metrics are notably higher than the P/E ratio of 37.30x and P/B ratio of 10.24x reported by other sources as of late 2025. Compared to its historical averages, the current P/E and P/B ratios are at the higher end of the 10-year range (P/E 20.1x-109.16x, P/B 4.17x-12.68x), indicating that the market is assigning a premium valuation to these growth-oriented companies. The ETF's current dividend yield stands at a modest 0.38%. This elevated valuation suggests investors are paying a premium for the expected high growth rates of the underlying companies, making the fund relatively expensive compared to its long-term historical averages.

The Bull Case - Upside to

Robust Earnings Growth from Tech Giants

Medium Probability

If VUG's top technology holdings (e.g., NVIDIA, Apple, Microsoft) sustain their high earnings growth rates, potentially fueled by increased AI adoption and cloud infrastructure spending, the ETF could see a 20-25% NAV appreciation over the next 12-18 months.

Favorable Monetary Policy Shift

Medium Probability

Should the Federal Reserve implement multiple interest rate cuts, lower borrowing costs and a reduced discount rate for future earnings would likely expand valuation multiples for growth stocks, potentially adding 15-20% to VUG's NAV.

Innovation and Product Cycles Drive Demand

High Probability

Successful new product launches and sustained innovation across VUG's holdings (e.g., Apple's new devices, Tesla's EV advancements) could stimulate strong consumer and enterprise demand, boosting revenue and profit forecasts by 10-15% and supporting higher share prices.

The Bear Case - Downside to

Valuation Contraction Amidst Economic Slowdown

Medium Probability

In the event of a significant economic slowdown or recession, VUG's high P/E (39.3x) and P/B (12.7x) multiples could contract sharply, potentially leading to a 20-25% decline in NAV as investors de-risk from growth stocks.

Increased Regulatory Pressure on Tech Sector

Medium Probability

Heightened antitrust scrutiny or new regulations targeting dominant technology companies could disrupt business models, impose fines, or limit growth opportunities, resulting in a 10-15% NAV reduction for VUG.

Disappointing Earnings or Missed Expectations

High Probability

If key growth companies within VUG fail to meet or exceed high market expectations for earnings and revenue, investor confidence could wane, leading to sharp sell-offs and a potential 15-20% drop in the ETF's NAV.

Risk/Reward Assessment

The risk-reward proposition for VUG appears balanced but tilted towards higher inherent volatility, characteristic of large-cap growth equities. The bull case hinges on the continued dominance and innovation of its mega-cap technology holdings, supported by favorable monetary policy and robust economic expansion. Should these catalysts materialize, the fund could deliver substantial returns, potentially justifying its premium valuation. However, the bear case highlights significant vulnerabilities. Current elevated valuations leave little room for error, making the ETF susceptible to sharp corrections if growth falters, regulatory risks escalate, or a broader economic contraction takes hold. Investors considering VUG should have a long-term investment horizon and a high tolerance for risk, understanding that while the upside is compelling, the downside risks are equally pronounced, especially given the concentrated nature of the portfolio.

Peer Comparison

• VUG offers a highly competitive expense ratio of 0.04%, tying with SCHG as the lowest among its direct peers, translating to significant cost savings for long-term investors. • Its substantial AUM of US$352.3 billion provides superior liquidity and potentially tighter bid-ask spreads compared to smaller competitors like MGK (US$31.6 billion) and VOOG (US$22.0 billion). • Performance-wise, VUG has demonstrated strong annualized returns across 1, 3, and 5-year periods, generally outperforming the category average and closely tracking its benchmark. • While all peers offer similar exposure to large-cap U.S. growth, VUG's deep liquidity, low cost, and robust long-term track record make it a compelling choice for core portfolio allocation to this segment.

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
Vanguard Growth ETF (VUG) ⭐	4.00%	US$352.3B	19.44%	32.50%	14.63%	0.38%
Vanguard Russell 1000 Growth ETF (VONG)	7.00%	US$44.8B	18.48%	31.02%	15.22%	0.44%
Vanguard Mega Cap Growth ETF (MGK)	7.00%	US$31.6B	20.71%	34.62%	15.70%	0.32%
Vanguard S&P 500 Growth ETF (VOOG)	7.00%	US$22.0B	22.08%	29.18%	14.93%	0.46%
Schwab U.S. Large-Cap Growth ETF (SCHG)	4.00%	US$52.9B	17.50%	31.16%	15.70%	0.34%

🎯 Why This Matters

The detailed valuation and peer comparison demonstrate VUG's strong standing within the large-cap U.S. growth equity segment, particularly its cost efficiency and liquidity. However, investors must weigh these advantages against the current elevated valuations of its underlying holdings and the inherent concentration risk. This analysis provides critical context for making informed decisions on whether to initiate, increase, or reduce exposure to this highly dynamic and potentially volatile asset class.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	NVDA	N	NVIDIA Corporation	Technology	12.7%
2	AAPL	A	Apple Inc.	Technology	11.9%
3	MSFT	M	Microsoft Corporation	Technology	10.6%
4	GOOGL	A	Alphabet Inc. Class A	Communication Services	5.4%
5	AMZN	A	Amazon.com Inc.	Consumer Cyclical	4.6%
6	GOOG	A	Alphabet Inc. Class C	Communication Services	4.3%
7	META	M	Meta Platforms Inc.	Communication Services	4.3%
8	AVGO	B	Broadcom Inc.	Technology	4.0%
9	TSLA	T	Tesla Inc.	Consumer Cyclical	3.8%
10	LLY	E	Eli Lilly and Company	Healthcare	2.7%

Fund Mechanics

How It Works

The Vanguard Growth Index Fund ETF employs a passive, full-replication investment approach, meticulously designed to track the performance of the CRSP US Large Cap Growth Index. This index, provided by the Center for Research in Security Prices (CRSP), measures the investment return of large-capitalization growth stocks within the U.S. equity market. The fund achieves its objective by investing substantially all of its assets in the stocks that comprise the index, aiming to hold each security in approximately the same proportion as its weighting in the benchmark. This methodology minimizes tracking error and ensures that the ETF's performance closely mirrors that of its underlying index. The index selects stocks based on several growth factors, including expected and historical earnings per share growth, sales per share growth, investment-to-assets ratio, and return on assets. Being passively managed, VUG does not attempt to outperform the market or its benchmark through active stock selection or tactical asset allocation decisions. Instead, its strategy focuses on efficient and low-cost replication of the index. The index is fully reviewed and rebalanced on a quarterly basis, ensuring it remains representative of the large-cap growth segment of the U.S. equity market while aiming for low turnover. The fund is domiciled in the United States and distributes dividends quarterly.

Holdings Breakdown

Number of Holdings

151

Top 10 Concentration

6427.0%

Top 20 Concentration

7662.0%

Turnover Rate

1100%

Category	Weight	Description
Technology	52.5%	Companies involved in software, hardware, semiconductors, and IT services.
Communication Services	16.4%	Companies providing telecommunication services, media, and interactive media & services.
Consumer Cyclical	12.8%	Companies manufacturing goods and services sensitive to business cycles, such as automotive, retail, and hotels.
Healthcare	5.7%	Companies engaged in pharmaceuticals, biotechnology, medical devices, and healthcare services.
Financials	5.4%	Companies providing banking, investment, insurance, and real estate services.
Industrials	3.8%	Companies involved in aerospace & defense, construction, machinery, and professional services.
Consumer Defensive	1.3%	Companies producing goods and services less sensitive to business cycles, like food, beverages, and household products.
Real Estate	1.1%	Companies engaged in real estate development, management, and REITs.
Basic Materials	0.7%	Companies involved in the discovery, development, and processing of raw materials.
Energy	0.3%	Companies involved in the exploration, production, and refining of oil & gas.

Cost Efficiency

Expense Ratio

4.00%

Median Bid-Ask Spread

1.000%

Metric	1 Year	3 Year	5 Year
Tracking Error	1.00%	1.00%	1.00%
Tracking Difference	-4.00%	-5.00%	-4.00%

Expense Ratio History

Year	Expense Ratio
2025	4.00%
2024	4.00%
2023	4.00%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown	Sharpe Ratio
2025	19.44%	19.48%	-0.04%	23.60%	9.53%	N/A
2024	32.68%	32.73%	-0.05%	23.60%	10.85%	N/A
2023	46.78%	46.86%	-0.08%	23.60%	17.24%	N/A
2022	-33.13%	-33.13%	0.00%	23.60%	33.57%	N/A
2021	27.26%	27.30%	-0.04%	23.60%	13.74%	N/A

Annualized Return Since Inception

12.05%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
VUG ⭐	Vanguard Growth ETF	Vanguard	4.00%	US$352.3B	19.4%	32.5%	14.6%	0.38%	19.60%	0.51	1.000%
VONG	Vanguard Russell 1000 Growth ETF	Vanguard	7.00%	US$44.8B	18.5%	31.0%	15.2%	0.44%	N/A	N/A	2.000%
MGK	Vanguard Mega Cap Growth ETF	Vanguard	7.00%	US$31.6B	20.7%	34.6%	15.7%	0.32%	N/A	N/A	N/A
VOOG	Vanguard S&P 500 Growth ETF	Vanguard	7.00%	US$22.0B	22.1%	29.2%	14.9%	0.46%	N/A	N/A	N/A
SCHG	Schwab U.S. Large-Cap Growth ETF	Charles Schwab	4.00%	US$52.9B	17.5%	31.2%	15.7%	0.34%	N/A	N/A	N/A
Category Average			35.00%	—	13.2%	21.1%	10.6%	0.15%	—	N/A	—

Risk Metrics

Beta

1.18

Alpha

-0.04

R-Squared

0.94

Standard Deviation

1 Year	3 Years	5 Years	10 Years
23.60%	19.60%	22.40%	21.40%

Sharpe Ratio

1Y	3Y	5Y	10Y
N/A	0.51	N/A	N/A

Sortino Ratio

3 Years	5 Years
0.74	N/A

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
N/A	N/A	N/A	-50.67%

Correlations

S&P 500

0.97

Liquidity & Trading

Volume

Avg Daily Shares

1,365,178

Avg Daily Dollar Volume

US$664.6M

Trend

stable

Bid-Ask Spread

Metric	Value
Median (Percent)	1.000%
Median (Dollar)	US$0.05
During Hours	N/A
At Close	N/A
Volatility	low

Premium/Discount to NAV

Metric	Value
Current	69.00%
30-Day Average	1.00%
1-Year Average	1.00%
Standard Deviation	N/A
Max Premium (1Y)	6.00%
Max Discount (1Y)	-4.00%

Creation/Redemption Activity

Trend

stable

Net Flows

Period	Net Flow
1 Year	US$0.0M

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.