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MGK vs VUG: Which Is The Best Vanguard Growth ETF?

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We compare MGK vs VUG:

Vanguard Mega Cap Growth ETF (MGK) and Vanguard Growth ETF (VUG) are both among the best growth Exchange Traded Funds (ETFs).

These two Exchange Traded Funds (ETFs) are very popular.

This article will help you decide between MGK and VUG.

MGK vs VUG Graphic

 

MGK vs VUG

The main difference between MGK and VUG is the index the ETF tracks.  MGK tracks the CRSP US Mega Cap Growth Index while VUG tracks the CRSP US Large Cap Growth Index.

MGK tracks the CRSP US Mega Cap Growth Index

VUG tracks the CRSP US Large Cap Growth Index

Another significant difference between these two ETFs is the number of holdings in each.

MGK holds 111 stocks

VUG holds 287 stocks

This means VUG holds more than double the number of stocks compared to MGK.  This makes VUG slightly more diversified as we will see in their holdings sections.

MGK

  • Tracks the CRSP US Mega Cap Growth Index
  • Expense Ratio: 0.07%
  • Holds 111 Stocks
  • Dividend Yield 0.4%
  • No Equivalent Admiral Fund
  • Similar ETF (VGT)

VUG

  • Tracks the CRSP US Large Cap Growth Index
  • Expense Ratio: 0.04%
  • Holds 287 Stocks
  • Dividend Yield 0.4%
  • Equivalent Admiral Fund (VIGAX)

 

MGK vs VUG Performance

MGK and VUG have performed similarly over the last 10 years with MGK beating VUG by only 0.64% annually.  However, that does not guarantee the next 10 years will look the same.

Here is a side by side comparison of their performance:

MGK vs VUG Performance

Here is MGK vs VUG performance on a chart:

MGK vs VUG Performance Comparison

As you can see, MGK has slightly outperformed VUG over the last 10 years by 0.64% annually.  In total that is about 6% higher returns over the last 10 years.

Similarities between MGK and VUG:

  • Vanguard Exchange-Traded Funds (ETFs)
  • Low Amount Of Holdings (111 vs 287)
  • Low Expense Ratios (0.07% vs 0.04%)
  • Focus On Growth Companies

 

MGK and VUG Differences

The primary difference between MGK and VUG is that MGK tracks a different index than VUG.  MGK tracks the CRSP US Mega Cap Growth Index and VUG tracks the CRSP US Large Cap Growth Index.

They are both focused on US growth stocks.

MGK also has less than half the number of holdings compared to VUG (111 vs 287).  This gives VUG a bit more diversification within the growth sector and likely less volatility.

Both are passively managed and have very low expense ratios (0.07% vs 0.04%).

By investing in ETFs with low expense ratios, you keep more of your returns.  This can make a big difference over time.

Differences between MGK and VUG:

  • Number Of Holdings (111 vs 287)
  • Index The Fund Tracks
  • Level Of Diversification
  • Level Of Volatility

 

MGK vs VUG Holdings

Vanguard’s MGK has less than half the number of holdings compared to VUG (111 vs 287).  MGK and VUG have the same top 10 holdings.

The difference is MGK’s top 10 holdings make up 58% of its total holdings compared to 48% with VUG.

This makes MGK more technology-heavy with the technology sector making up 58% of the assets.  MGK performance will also have more volatility depending on the performance of these top 10 holdings.

Here is MGK and VUG’s top 10 holdings side by side:

MGK vs VUG Top Holdings Comparison

MGK and VUG are both largely made up of Apple, Microsoft, Amazon, Google, and Tesla.

 

MGK Profile

The Vanguard Group is one of the largest investment companies in the world.  They launched Vanguard Mega Cap Growth ETF (MGK) in 2007 to track the CRSP US Mega Cap Growth Index.

The Vanguard group is known for its focus on low-cost investing through mutual funds and ETFs, and MGK is one of its ETFs.MGK Profile

MGK is a growth ETF that focuses on the largest companies in the United States with a good growth history.  The index stocks that therefore select 70% of the highest market capitalization companies based on growth factors.

Vanguard uses some outstanding growth metrics to score securities with MGK, these include:

  • Future long-term growth in earnings per share (EPS)
  • Future short-term growth in EPS
  • Three-year historical growth in EPS
  • Three-year historical growth in sales per share
  • Current investment-to-assets ratio
  • Return on assets

Any stock that is included in the MGK index must meet these six growth factors.

With the same cap size split as its benchmark and similar weighting among sectors, MGK provides market-like exposure.

As with all Vanguard ETFs, MGK only discloses its holdings monthly.

 

MGK Performance

Vanguard Mega Cap Growth ETF (MGK) has outperformed the S&P 500 and many other Vanguard ETFs over the last 10 years:

MGK Performance Chart

However, be mindful that this does not guarantee the next 10 years will look the same.

 

MGK Holdings

Vanguard’s MGK is a broad ETF, diversified across different sectors:

  • Technology
  • Consumer Cyclicals
  • Healthcare
  • Industrials
  • Financials
  • Basic Materials
  • Consumer Non-Cyclicals

The fund has a heavy weighting toward technology which gives it an advantage since this sector is booming and always evolving.

Here are the top 10 holdings for MGK from Vanguard:

MGK Top 10 Holdings

The top 10 holdings for MGK make up a significant amount of its total holdings.

 

VUG Profile

  • Fund Inception: 2004
  • Expense Ratio: 0.04%
  • Number Of Stocks: 287
  • Top 10 Holdings: 50%
  • Equivalent Admiral Fund (VIGAX)

Vanguard Growth ETF (VUG) is an ETF focused on growth companies.  The price-to-earning (P/E) ratio for VUG is 38.8x which is high.

The fund has $169 billion in total net assets.

 

VUG Performance

Vanguards Growth ETF (VUG) has outperformed the S&P 500 and therefore Vanguard 500 Index Fund ETF (VOO) over the last 10 years:

VUG Performance Chart

VUG (Blue)    S&P 500 (Yellow)

However, be mindful that this does not guarantee the next 10 years will look the same.

 

VUG Holdings

Vanguard’s VUG is largely made up of Apple, Microsoft, Google, Amazon, and Tesla and provides exposure to over 250 stocks.

VUG Top 10 Holdings

The top 10 holdings make up 50% of the portfolio.

This makes VUG less diversified compared to other ETFs such as Vanguard Total Stock Market Index Fund ETF (VTI).

 

No Minimum Investment

MGK and VUG are both exchange-traded funds (ETFs) so there is no minimum investment.  Investors looking to buy fractional shares can use platforms like M1 Finance.

Normally, fractional shares are not available for ETFs but with M1 Finance you can purchase fractional shares with no commission.

Buying fractional shares allows you to maximize your investment.  This is great for shares of MGK or VUG due to their high prices per share (~$235 and $308).

There are two easy ways to invest in MGK or VUG commission-free:

  1. Vanguard
  2. M1 Finance (Use this link for $50 when you open a new account)

Both of these options are free.  This is important because fees can lower our returns.

I like M1 Finance as the best option because it gives you the flexibility to purchase VUG, MGK, and thousands of other stocks.

I also use Personal Capital to track my investment fees. They have a free Retirement Fee Analyzer that tells you the future impact of fees on your portfolio.

Personal Capital Retirement Fee Analyzer

Personal Capital’s free tools allow you to easily find which of your investments has high fees so that you can switch them to low-cost options.  (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)

 

Which Is Better MGK or VUG?

MKG and VUG are both great investments.  They both offer investors the ability to invest in the US growth market at a low expense ratio.

MGK offers more potential returns but is also more volatile.

If you believe the success of MGK will continue and are willing to ride the waves of volatility then MGK might be a great investment for you.

If you prefer a slightly more balanced approach with less dependence on an ETFs top 10 holdings, then VUG makes more sense.

The expense ratio difference between these two ETFs will not make a significant difference in total returns.  You can further keep costs down by buying and selling shares commission-free.

Again a great way to do this is with M1 Finance.

You can purchase fractional shares for free and they give you the ability to buy MGK, VUG, and thousands of other stocks/ETFs.

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My Winner: VUG

My winner is VUG solely based on the increased diversification and its slightly lower expense ratio.

Having said that, both ETFs have low expense ratios and have performed well over the last decade.

There is also no guarantee that the next 10 years will look the same but with their low cost, I believe MGK and VUG can make for a great addition to an investor’s portfolio.

I would add that it’s likely you would want to consider other index funds with more diversification into different sectors or countries as a core holding.

 


Disclaimer
This post may have affiliate links, which means I may receive commissions if you choose to purchase through links I provide (at no extra cost to you). Thank you for supporting the work I put into this site!

This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
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