Vanguard (VONG) vs. iShares (IWO): Which Growth Stock ETF Is Best for Investors?

Vanguard Russell 1000 Growth ETF (NASDAQ:VONG) and iShares Russell 2000 Growth ETF (NYSEMKT:IWO) target U.S. growth stocks but differ sharply on cost, portfolio size, and sector focus, with VONG leaning toward large-cap tech and IWO spanning a wider range of small-cap growth names.

VONG and IWO both aim to capture U.S. growth stocks. Still, their approaches are distinct: VONG focuses on large-cap growth, dominated by technology giants, while IWO targets small caps, offering a more diversified but riskier profile. This comparison unpacks cost, performance, risk, and underlying holdings to help investors decide which style may appeal more.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The one-year return represents total return over the trailing 12 months.

VONG stands out for its much lower expense ratio, making it more affordable for cost-conscious investors, as IWO costs about four times as much. Both ETFs offer modest dividend yields of 0.5%.

Performance & risk comparison

What's inside

IWO tracks small-cap U.S. growth stocks, currently holding 1,102 companies with a tilt toward healthcare (24%), technology (23%), and industrials (22%). Its largest positions, such as Bloom Energy, Fabrinet, and Credo Technology, each comprise only a small fraction of assets, reflecting broad diversification. With a fund age of 25.7 years, IWO provides long-running access to the small-cap growth segment, which can be volatile but may offer unique opportunities for those seeking to diversify away from mega-cap names.

VONG, in contrast, holds 394 stocks and is heavily concentrated in technology (49%), with substantial weight in Nvidia, Apple, and Microsoft. This concentration provides sharper exposure to large-cap tech trends, while its sector mix and smaller stock count mean less diversification than IWO. Both funds avoid leverage and other structural quirks, but their distinct sizes and sectors could lead to diverging risk and return patterns over time.

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What this means for investors

Since 2010, VONG has delivered impressive annualized total returns of 16%, largely powered by the Magnificent Seven, each of which holds a top-10 spot in the ETF’s allocation. Over the same period, the S&P 500 Index rose 14% annually, for comparison. Meanwhile, IWO compounded its total returns by nearly 11% annually since 2010. While this is slightly lower, it nonetheless matches the market’s long-term historical averages and is nothing to dismiss. Since IWO focuses on small-cap growth stocks, it missed the remarkable run of the Magnificent Seven, which helped explain much of the underperformance.

As to which ETF is better, I think it solely depends on what an investor’s portfolio already looks like -- and what they want it to look like going forward. If an investor already holds an S&P 500 Index, a tech-heavy ETF, or already has a lot of exposure to the Magnificent Seven (perhaps holding the stocks individually), VONG may not really benefit them due to its weighting to the mega-cap tech stocks. The Magnificent Seven (plus Broadcom and Eli Lilly) account for 58% of VONG’s portfolio, so they play a huge role in determining the ETF’s performance.

Meanwhile, IWO’s small-cap growth stock exposure and steady 11% historical returns offer an alternative for investors who likely already own mega-cap tech stocks. Though IWO has a slightly higher expense ratio, its 0.24% fee isn’t outrageous by any means. Naturally, since IWO consists of younger growth stocks, its returns are more volatile, but I believe it is important for investors to have exposure to this small-cap portion of the market as well.

Personally, I already have a lot of (perhaps too much) exposure to mega-cap technology stocks, so I could only consider buying IWO. Yes, it has underperformed recently as the Magnificent Seven soared, but I’d imagine things will balance out in the long haul (thinking in decades). Since I already own many of VONG’s top holdings, but probably own almost none of IWO’s, the latter makes much more sense for my portfolio.

Josh Kohn-Lindquist has positions in Nvidia. The Motley Fool has positions in and recommends Apple, Bloom Energy, Microsoft, and Nvidia and is short shares of Apple. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.