Vanguard Russell 1000 Growth ETF (NASDAQ:VONG) provides low-cost exposure to large-cap U.S. leaders, while Invesco S&P SmallCap 600 Revenue ETF (NYSEMKT:RZG) offers a niche, revenue-weighted strategy for small-cap growth companies.
These two funds target different ends of the market capitalization spectrum. The Vanguard fund tracks established American corporations, whereas the Invesco fund filters the small-cap universe based on revenue and growth characteristics, creating distinct risk and volatility profiles for long-term investors looking to diversify their equity holdings.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). 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 significantly more affordable, with its 0.06% expense ratio undercutting the 0.35% charged by the Invesco fund. Both ETFs currently offer a 0.5% yield, making the primary choice between them a matter of market-cap preference.
Performance & risk comparison
What’s inside
Vanguard Russell 1000 Growth ETF allocates capital to equities within the Russell 1000 Growth Index, serving as a standard measure for large-capitalization U.S. growth stocks. The portfolio is heavily weighted toward technology (68%) and communication services (17%), focusing on established American corporations with capital appreciation potential. Its largest positions include Nvidia at 15.5%, Alphabet at 10.72%, and Apple at 7.5%. The fund was launched in 2010. Vanguard Russell 1000 Growth ETF has paid $0.58 per share over the trailing 12 months, which on its recent ~$124.84 share price works out to a 0.5% yield.
Invesco S&P SmallCap 600 Revenue ETF invests at least 90% of its assets in a revenue-weighted subset of the S&P SmallCap 600 Index. It focuses on small-cap companies exhibiting strong growth characteristics, resulting in a sector mix led by healthcare (23%), industrials (17%), and financial services (17%). The fund contains 127 holdings, and its top positions include ACM Research at 2.1%, Protagonist Therapeutics at 2.01%, and Dave at 2.01%. It was launched in 2006. Invesco S&P SmallCap 600 Revenue ETF has paid $0.30 per share over the trailing 12 months, which on its recent ~$65.17 share price works out to a 0.5% yield.
For more guidance on ETF investing, check out the full guide at this link.
Which looks like the better buy
Is it better to invest in large-cap or small-cap stocks? This is the primary debate between putting dollars to work in VONG vs. RZG. VONG holds today’s market leaders, with heavy concentration in technology and a more than $45 billion portfolio. It’s market-cap weighted, so the largest of the large take up the most space in the fund. RZG holds small-cap stocks that exhibit growth characteristics, and weights them not by market cap, but by a growth score determined by sales growth, ratio of earnings change to price, and momentum.
RZG’s one-year growth shows the potential promise of small-cap stocks. That is, these companies are earlier in their growth stages and could be on the verge of becoming the next big winners. Large caps, in comparison, are unlikely to exhibit such explosive growth, because they’re working off a much larger base. But small caps can also be riskier investments. They are often investing more in their growth and marketing, may face regulatory challenges, and need to clear financial hurdles that more mature companies have already handled.
VONG holds stocks that should be foundational to your portfolio, but you may already have exposure to Nvidia, Alphabet, and Apple through another ETF, like one that tracks the S&P 500, or even as individual holdings. If you’re satisfied with your exposure there, you may want to consider taking a position in RZG or another fund that gives you exposure to a different, more dynamic market segment, assuming you’re ready and willing to navigate the increased volatility.
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Sarah Sidlow has positions in Alphabet, Apple, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Apple, and Nvidia. The Motley Fool recommends Protagonist Therapeutics. The Motley Fool has a disclosure policy.
Vanguard Russell 1000 Growth vs. Invesco SmallCap 600 Revenue: Which Is Better for a Diversified Portfolio? was originally published by The Motley Fool
