VONG vs. MGK: Is Diversified Growth or Mega-Cap Concentration Better for Investors?

Core Insights - The article compares two low-cost Vanguard ETFs, the Vanguard Mega Cap Growth ETF (MGK) and the Vanguard Russell 1000 Growth ETF (VONG), focusing on their diversification, sector exposure, and risk profiles for growth-focused investors [1][2]. Group 1: Fund Overview - Both MGK and VONG are passively managed funds from Vanguard that target U.S. large-cap growth stocks, with an expense ratio of 0.07% for both [3]. - As of December 27, 2025, MGK has a 1-year return of 17.59% and a dividend yield of 0.37%, while VONG has a 1-year return of 15.46% and a higher dividend yield of 0.45% [3]. Group 2: Performance & Risk Metrics - Over the past five years, MGK has a maximum drawdown of -36.02%, compared to VONG's -32.72%, indicating MGK's higher volatility [4]. - An investment of $1,000 in MGK would have grown to $2,080 over five years, while the same investment in VONG would have grown to $2,010 [4]. Group 3: Portfolio Composition - VONG tracks the Russell 1000 Growth Index, holding 391 stocks with a significant allocation of 55% in technology, while MGK is more concentrated with only 66 stocks and a 58% allocation in technology [5][6]. - The top holdings for both funds include Nvidia, Apple, and Microsoft, but MGK has higher individual weights in these stocks, leading to greater concentration risk [6]. Group 4: Investment Implications - VONG offers greater diversification with nearly 400 stocks, reducing concentration risk compared to MGK's 66 stocks [7]. - While MGK has outperformed VONG in the past year and five years, the marginal difference in performance suggests that MGK's higher risk may not have yielded significantly better returns [8]. - Future performance may favor MGK if the tech sector continues to thrive, but VONG's diversification could mitigate risks during potential tech downturns [9].