This Vanguard ETF Has Doubled the S&P 500's Returns Year to Date. Should You Buy It?

Core Viewpoint - The Vanguard Dividend Appreciation ETF (VIG) has seen a resurgence in 2026, outperforming the Vanguard S&P 500 ETF, and is positioned well for the remainder of the year despite some concerns regarding its market cap-weighting strategy [1][3][10]. Performance Overview - VIG is up nearly 4% year to date, while the Vanguard S&P 500 ETF has shown a flat return, indicating a shift in investor preference towards dividend stocks as the market rotates away from high-growth tech stocks [3][6]. - The ETF's performance is supported by its focus on quality and value, which has become attractive as many sectors are now outperforming the S&P 500 [2][3]. Investment Strategy - VIG invests in over 300 U.S. stocks with a track record of at least 10 years of annual dividend growth, excluding real estate investment trusts (REITs) and the top 25% highest yields, resulting in a portfolio of stable, cash-rich companies [5][6]. - The current market environment, characterized by cautious investor sentiment and high valuations, favors defensive, value-oriented investments, which aligns with VIG's strategy [6][8]. Market Conditions - The shift in investor focus from high-yield tech stocks to dividend-paying stocks is attributed to a more cautious outlook on the U.S. economy and the Federal Reserve's interest rate policies [6][8]. - The favorable backdrop for dividend stocks is expected to continue as various sectors and styles outperform the S&P 500, alongside a recent uptick in Treasury performance [8]. Concerns - The market cap-weighting strategy of VIG, which prioritizes larger stocks regardless of their dividend quality, raises concerns, particularly as its top holdings include tech giants like Broadcom, Microsoft, and Apple, which have yields below 1% [9][10]. - The ETF's current allocation includes 26% in tech stocks, which may expose it to risks if the sector continues to underperform [9][10].