2 Vanguard ETFs That Have Crushed the Market in 2025: Growth Stocks Lead the Charge

The first half of 2025 has been a banner year for investors in growth-oriented equity strategies, with two Vanguard ETFs standing out as clear winners. The Vanguard S&P 500 Growth ETF (VOOG) and the Vanguard Growth ETF (VUG) have surged ahead of the broader market, delivering returns of 41.08% and 37.69% year-to-date (YTD), respectively. Both funds have capitalized on the rally in large-cap growth stocks, leveraging low expense ratios and strategic sector allocations. Let’s unpack what’s driving their success and whether these gains are sustainable.

VOOG: The Growth Engine of the S&P 500

The VOOG tracks the S&P 500 Growth Index, a subset of the S&P 500 focused on companies with higher growth rates and lower dividend yields. This ETF has benefited from a sharp rebound in tech giants and consumer discretionary stocks, sectors that dominate the index. With an expense ratio of just 0.10%, VOOG offers broad exposure to high-flying names like Amazon, Microsoft, and Alphabet.

The fund’s returns reflect a strong bias toward companies with robust earnings growth and innovative business models. While some investors worry about valuations—growth stocks often trade at higher multiples—the current environment has favored risk-on sentiment, driven by optimism around AI advancements and corporate profitability.

VUG: The Ultra-Low-Cost Growth Play

The VUG, which tracks the CRSP US Mega Cap Growth Index, has delivered 37.69% YTD on an even more compelling cost structure: its expense ratio is just 0.04%, making it one of the cheapest growth ETFs on the market. Like VOOG, VUG holds mega-cap growth stocks but with a slightly broader universe, including companies like Apple, Tesla, and Mastercard.

The fund’s performance underscores the power of cost efficiency. Lower fees directly translate to higher net returns over time, and in a year when growth stocks have outperformed value stocks by a wide margin, VUG’s low costs have amplified its appeal.

Why Growth Stocks Are Winning in 2025

The dominance of growth ETFs like VOOG and VUG isn’t an accident. Three factors are at play:

1. Valuation Cycles: Growth stocks had lagged behind value stocks for much of the past decade, making them a prime candidate for a rebound. Lower starting valuations and improving earnings momentum have fueled their resurgence.
2. Tech and Innovation: Companies at the forefront of AI, cloud computing, and e-commerce have seen surging demand, driving stock prices higher. The Vanguard Information Technology ETF (VGT), for instance, has risen 36.11% YTD, reinforcing the tech sector’s role in growth strategies.
3. Market Sentiment: Investors have embraced “risk-on” conditions, favoring high-beta stocks that amplify market movements. This environment has been particularly kind to growth-oriented ETFs.

The Risks Ahead

While these ETFs have thrived, they’re not without risks. Growth stocks are highly sensitive to interest rate changes and economic downturns. Should inflation resurge or the Federal Reserve pivot to a more hawkish stance, valuations could compress sharply. Additionally, geopolitical tensions—such as lingering risks from the Russia-Ukraine conflict—could disrupt global supply chains and investor confidence.

The Vanguard FTSE Europe ETF (VGK), which has gained 12% YTD, highlights the broader international opportunities, but its gains are tempered by exposure to trade wars and political instability.

Conclusion: Growth ETFs Are Winners, But Caution Remains

The VOOG and VUG have delivered stellar returns in 2025, leveraging the tailwinds of growth-driven markets and ultra-low costs. Their success underscores the importance of sector allocation and expense ratios in ETF performance. However, investors should remain mindful of the risks tied to growth stocks, including valuation peaks and macroeconomic volatility.

For long-term investors, these funds offer a disciplined way to participate in the growth of the U.S. economy’s largest companies. But with returns this strong, it’s prudent to rebalance portfolios periodically to avoid overexposure. As always, diversification—coupled with a focus on sustainable fundamentals—remains the best defense against market uncertainty.

In 2025, growth has been king. The question is whether it can stay that way.