Three Growth ETFs Deliver Vastly Different Returns Despite Tracking Similar Megacap Holdings
The Vanguard Growth ETF, SPDR Portfolio S&P 500 Growth ETF, and Schwab U.S. Large-Cap Growth ETF all invest in similar megacap companies but produce different results based on their underlying index construction rules rather than investor choices or fund management. Over ten years, Schwab's offering returned 455% while the SPDR version lagged significantly, demonstrating how index methodology drives performance gaps more than expense ratios alone. Vanguard's version charges the lowest fee at 0.03% but concentrates roughly 40% of assets in just four megacaps, including Apple at 12% of holdings.
These three funds illustrate a fundamental principle in passive investing: the rules governing index membership and weighting matter significantly. Each fund draws from a different rulebook—one restricted to S&P 500 companies, another using a broader market universe, and a third applying proprietary growth metrics—yet all three target similar large-cap growth stocks. The consequence is substantial performance divergence over time, with the ten-year gap between the best and worst performer exceeding 35 percentage points.
The concentration risk presents another key distinction. While all three heavily weight technology and megacap names, the degree varies considerably. Some funds allocate roughly 40% of assets to just four companies, whereas others distribute holdings more evenly across a wider stock universe. This structural difference means investors selecting based solely on recent returns or expense ratios alone may overlook how their portfolio's actual composition and risk profile differ meaningfully.
Retail investors making ETF selections could be materially affected by these findings, as many choose funds based on simple metrics like lowest fees or trailing performance rather than understanding underlying index construction. The significant return gaps over extended periods suggest that methodology differences, not management skill or cost efficiency alone, drive outcomes. This may incentivize investors to research fund mechanics more thoroughly, though it could also increase decision paralysis for those seeking straightforward, low-maintenance investment approaches.