Understanding the S&P 500

The S&P 500 is a widely-recognized stock market index comprising 500 of the largest U.S. publicly traded companies. These companies are chosen based on strict criteria, including:

• A market capitalization of at least $18 billion.
• Positive earnings.
• Approval by the Index Committee.

The S&P 500 is weighted by market capitalization, meaning larger companies have a greater influence on its performance than smaller ones.

The S&P 500 Growth Index

The S&P 500 Growth index takes a different approach. It includes 231 of the best-performing companies from the S&P 500, focusing on growth and momentum. This has led to a long-term outperformance compared to the broader S&P 500 index.

Vanguard S&P 500 Growth ETF (VOOG)

The Vanguard S&P 500 Growth ETF (VOOG) tracks the performance of the S&P 500 Growth index, holding the same stocks with similar weightings. It has consistently outperformed the S&P 500 due to its focus on growth stocks, particularly technology stocks.

Why the S&P 500 Growth Index Outperforms

The S&P 500 Growth index selects stocks based on factors like momentum and sales growth, making it heavily weighted towards technology stocks, which often lead the market in these areas.

Top Holdings in Vanguard S&P 500 Growth ETF

The five largest holdings in the Vanguard S&P 500 Growth ETF are all technology giants:

Stock	Vanguard S&P 500 Growth ETF Weighting	S&P 500 Weighting
Apple	12.40%	6.97%
Microsoft	11.65%	6.54%
Nvidia	11.03%	6.20%
Meta Platforms	4.48%	2.41%
Amazon	4.14%	3.45%

The Role of Artificial Intelligence (AI)

These top holdings are all heavily involved in the artificial intelligence (AI) industry, which is expected to revolutionize many sectors. This makes the Vanguard S&P 500 Growth ETF a compelling investment for investors seeking to capitalize on the AI boom.

• Apple is investing heavily in AI, with its new software, Apple Intelligence, promising to enhance its devices.
• Microsoft is seeing significant growth in its Azure cloud segment, driven by businesses adopting AI.
• Nvidia is at the forefront of AI development, supplying the graphics processing units (GPUs) essential for AI computing.

Historical Performance

The Vanguard S&P 500 Growth ETF has consistently outperformed the S&P 500, delivering a compound annual return of 16% since its inception in 2010, compared to the S&P 500's 13.7% average annual gain over the same period.

Future Outlook

The AI revolution is still in its early stages, and experts predict continued growth in AI spending for the next decade. This suggests that the Vanguard S&P 500 Growth ETF may continue to outperform the S&P 500 due to its exposure to these AI-driven companies.

Investment Considerations

Before investing in the Vanguard S&P 500 Growth ETF, consider the following:

• The ETF's high concentration in technology stocks can make it vulnerable to sector-specific risks.
• AI is a rapidly evolving field, and its future is uncertain.
• There are other investment options available that may offer higher returns.

It's crucial to conduct thorough research and consider your investment goals before making any decisions.