Which Is the Better Growth ETF, Vanguard's Russell 1000-Focused VONG or Invesco's Small-Cap RZG?
Compare sector weightings, top holdings, and risk profiles as these two growth ETFs take different paths to capital appreciation.
By Robert Izquierdo
The Vanguard Russell 1000 Growth ETF (VONG +1.34%) provides low-cost exposure to large-cap giants, while the Invesco S&P SmallCap 600 Pure Growth ETF (RZG +2.04%) offers a concentrated, higher-fee play on smaller companies with extreme growth traits.
Investors choosing between these growth-focused vehicles may find that market-cap exposure is the most significant differentiator. While both funds aim for capital appreciation through stocks with strong momentum, the Vanguard fund tracks established market leaders.
Conversely, the Invesco fund targets smaller companies that exhibit pure growth traits based on historical earnings and revenue expansion, which may appeal to those comfortable with higher volatility.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The Vanguard fund is substantially more affordable, with an expense ratio that is 0.29 percentage points lower than the Invesco fund. Both ETFs currently offer a matching dividend yield of 0.40%, which may be a minor consideration for investors who are primarily seeking long-term capital appreciation.
Performance & risk comparison
What's inside
The Vanguard Russell 1000 Growth ETF holds 394 stocks and is heavily tilted toward the technology sector at 51%, with additional exposure to communication services and consumer cyclicals at 13% each. Its largest positions include NVIDIA (NVDA +3.08%) at 13.07%, Apple (AAPL +0.86%) at 11.95%, and Microsoft (MSFT +0.19%) at 8.96%. Launched in 2010, the fund has paid $0.56 per share over the trailing 12 months.
In contrast, the Invesco S&P SmallCap 600 Pure Growth ETF tracks the S&P SmallCap 600 Pure Growth Index and manages 128 holdings. It emphasizes healthcare at 23%, technology at 18%, and industrials at 16%. Its top holdings include ACM Research (ACMR +14.22%) at 2.95%, Powell Industries (POWL +1.08%) at 2.15%, and StoneX Group (SNEX +4.79%) at 1.90%. This fund, launched in 2006, has a trailing-12-month dividend of $0.27 per share.
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What this means for investors
Growth stocks are great for achieving gains in an investment portfolio, making the Vanguard Russell 1000 Growth ETF (VONG) and Invesco S&P SmallCap 600 Pure Growth ETF (RZG) funds to consider investing in. Choosing between them comes down to a few considerations.
RZG seeks to deliver outsized growth through small-cap stocks. Smaller companies have the potential to enjoy significant share price appreciation compared to large-caps, as their businesses expand. The fund’s much larger one-year return demonstrates this.
However, smaller companies tend to experience greater volatility. A business in the fund can see a large sales jump due to a single big customer, but if that client cuts spending later, the company’s sales can plunge. Moreover, the fund’s high expense ratio for a passively-managed ETF and low AUM are additional drawbacks to consider.
VONG’s focus on large-cap growth stocks helped it achieve superior growth over five years thanks to the artificial intelligence boom. That’s why the technology sector represents over half the fund’s holdings. The downside is that tech stocks, particularly those in the AI industry, are more volatile than other sectors.
Still, VONG’s far larger AUM gives it a strong advantage over RZG. This boosts liquidity, allowing the ETF to deliver tighter bid-ask spreads, reducing costs on every transaction.
VONG’s combination of established players in its fund, the hot AI sector driving growth, its lower expense ratio, and higher AUM make it a better choice than RZG for investors seeking growth stocks.