MGK vs VUG – Which Vanguard Growth ETF Should You Choose?

An Overview of MGK vs VUG

Vanguard Mega Cap Growth ETF
(MGK)
Vanguard Growth ETF
(VUG)
Benchmark IndexCRSP US Mega Cap Growth IndexCRSP US Large Cap Growth Index
Fund TypePassive ETFPassive ETF
Expense Ratio0.07%0.04%
Number of Stocks100257
% of 10 largest holdings57.2%46.80%
Dividend Yield0.57%0.59%
AUM$10.0 billion$145.7 billion
as of 31/12/2020
Source: investor.vanguard.com

Vanguard funds are known for their low cost ETF. MGK has expense ratio of 0.07% vs VUG’s 0.04%. For every $10,000 you invest, you are only paying $7 and $4 respectively each year in management expenses.

Both these ETFs has similar Dividend Yield. MGK’s 0.57% yield is slightly lower than VUG’s 0.59%. These low yield expected because growth companies usually retain their a large portion of their earnings for company growth and expansion, instead of distributing it to shareholder as dividend.

Another difference we see is the size of the AUM. MGK has a smaller AUM with $10B compared to VUG’s $145.7B. That is like 10x bigger.

Main Difference between MGK vs VUG

Median Market Cap
MGK$464.7 billion
VUG$238.9 billion
as of 31/12/2020
Source: investor.vanguard.com

MGK tracks the CRSP US Mega Cap Growth Index. Only growth companies that are of Mega Market Cap are included. This is why we see lesser number of stocks compared to VUG.

VUG on the other hand, tracks the CRSP US Large Cap Growth Index. This means that any growth companies that are Large Market Cap and above will be included, thus the larger number of stocks we see in VUG

Top 10 Holdings

Vanguard Mega Cap Growth ETF
(MGK)
Vanguard Growth ETF
(VUG)
Apple Inc.
(13.50%)
Apple Inc.
(11.10%)
Microsoft Corp.
(11.20%)
Microsoft Corp.
(9.20%)
Amazon.com Inc.
(9.20%)
Amazon.com Inc.
(7.60%)
Alphabet Inc.
(6.80%)
Alphabet Inc.
(5.50%)
Facebook Inc.
(4.40%)
Facebook Inc.
(3.60%)
Tesla Inc.
(3.60%)
Tesla Inc.
(2.90%)
Visa Inc.
(2.50%)
Visa Inc.
(1.90%)
Mastercard Inc.
(2.10%)
Mastercard Inc.
(1.70%)
NVIDIA Corp.
(2.00%)
NVIDIA Corp.
(1.70%)
Home Depot Inc.
(1.90%)
Home Depot Inc.
(1.60%)
57.20% of total net asset46.80% of total net asset
as of 31/12/2020
Source: investor.vanguard.com

Top 10 holdings on both ETFs are the same. It is of no surprise. Because these index are Market Cap Weighted. So obviously, the top 10 Market Caps for both will make up the top 10 holdings.

The slight difference is that the top 10 in MGK makes up 57.20% of total net asset compared to 46.80% of total net asset for VUG.

Nevertheless, these are still very high concentration of stocks from the top 10 holdings.

MGK vs VUG – Performance

Using the Portfolio Visualizer to back test these 2 ETFs, we can then compare the portfolio growth between Jan 2008 – Dec 2020. The time period was constrained by the available data for MGK (Vanguard Mega Cap Growth ETF).

MGK vs VUG performance graph

This is what you will end up with at the end of Dec 2020 if you have invest $10,000 in 2008.

MGK (Vanguard Mega Growth ETF): $48,250
VUG (Vanguard Growth ETF): $46,180

This works out to be 4.4% more returns if you have invested in MGK.

Annual Returns

MGK vs VUG annual returns

2008 and 2018 are the only years that both these ETFs return losses. MGK incur losses of -36.25% vs VUG’s -38.02% in 2008, and -2.90% vs -3.31% in 2018.

MGK does slightly better in downturn. But during a mega crisis like the one in 2008, one can expect more than 30% losses for both ETFs in a year.

Annualized Returns

1 Year5 Year10 Year
MGK41.13%21.03%17.22%
VUG40.27%20.34%16.67%
as of 31/12/2020
Source: investor.vanguard.com

The annualized returns we see for both these funds are very similar, with a difference of approx. 1% difference.

Conclusion – Which Vanguard Growth ETF Should You Choose?

As we can see from the performance chart and the annualized returns table, these 2 ETFs have very similar characteristics and returns. MGK did perform slightly better than VUG based on the past data.

Personally, I am invested in VUG, because it is more diversified with more stocks in the ETF, and it has a larger AUM. Which means it may have more volume than MGK.

So if you want a more diversified portfolio, maybe you can consider VUG. But other than that, they are really similar in terms of returns and drawdowns.

As always remember that Past Performance is No Guarantee of Future Results.