Which Vanguard ETFs Have Beaten Warren Buffett's Favorite ETF Since Inception?

Warren Buffett has dropped enough hints to ascertain that his favorite exchange-traded fund (ETF) is the Vanguard S&P 500 ETF (VOO -0.25%). This ETF has been a huge winner historically, but which Vanguard ETFs have beaten Buffett’s favorite ETF since inception?

Only two make the list: the Vanguard Russell 1000 Growth Index Fund ETF (VONG -0.63%) and the Vanguard S&P 500 Growth Index Fund ETF (VOOG -0.70%).

Vanguard Russell 1000 Growth ETF

Of Vanguard’s 94 ETFs, the Vanguard Russell 1000 Growth ETF has been the best performer over the long run. This fund’s average annual return since its inception on Sept. 20, 2010, is an impressive 16.4%. By comparison, the Vanguard S&P 500 ETF’s average annual return since its inception on Sept. 7, 2010, is 14.24%.

VONG Total Return Price data by YCharts

This Vanguard ETF attempts to track the return of the Russell 1000 Growth Index. The index includes growth stocks in the large-cap Russell 1000 index. The Vanguard Russell 1000 Growth ETF currently owns 392 stocks. Its largest positions are Microsoft, Nvidia, Apple, Amazon, and Meta Platforms. Not so coincidentally, these are also the five largest holdings of the Vanguard S&P 500 ETF.

Many of the stocks in the Vanguard Russell 1000 Growth Index Fund ETF are also in the Vanguard S&P 500 ETF, so how has it delivered such a higher average annual return? One key is that the ETF’s focus on growth stocks eliminates some of the S&P 500 members that don’t typically generate outstanding returns.

Granted, there is at least one way that the Vanguard S&P 500 ETF beats the Vanguard Russell 1000 Growth ETF. Its annual expense ratio of 0.03% is lower than the latter’s expense ratio of 0.07%. Of course, that small difference doesn’t matter much with the Vanguard Russell 1000 Growth ETF’s higher returns.

Also, if you’re interested in income, you’ll probably prefer the Vanguard S&P 500 ETF. Its 30-day SEC yield (which reflects a fund’s projected annual dividend yield over a trailing-30-day period) is 1.24%, versus only 0.53% for the Vanguard Russell 1000 Growth ETF.

Vanguard S&P 500 Growth ETF

Since the Vanguard Russell 1000 Growth ETF has outperformed the Vanguard S&P 500 ETF over the long term, it isn’t surprising that the Vanguard S&P 500 Growth ETF has also been a bigger winner. This Vanguard ETF has delivered an average annual return since its inception on Sept. 7, 2010, of 16.01%.

VOOG Total Return Price data by YCharts

Like the Vanguard S&P 500 ETF, the Vanguard S&P 500 Growth ETF only includes stocks in the S&P 500. However, it’s even more exclusive by limiting the pool to growth stocks. The fund currently owns 212 stocks. Its top holdings are similar to those of the Vanguard S&P 500 ETF, but not exactly alike: Nvidia, Microsoft, Meta Platforms, Apple, and Broadcom.

The main disadvantages of the Vanguard S&P 500 Growth ETF compared to the Vanguard S&P 500 ETF are the same as those mentioned for the Vanguard Russell 1000 Growth ETF. The fund’s annual expense ratio of 0.07% is a little higher. Its 30-day SEC yield of 0.55% is lower.

A more important question

If you wanted to beat Buffett’s favorite ETF in the past, the only Vanguard ETFs to have pulled it off since inception are the Vanguard Russell 1000 Growth Index Fund ETF and the Vanguard S&P 500 Growth Index Fund ETF. However, there’s a more important question: Which Vanguard ETFs are most likely to outperform the Vanguard S&P 500 ETF over the long term?

I think the Vanguard Russell 1000 Growth ETF and the Vanguard S&P 500 Growth ETF would likely make the list again. Their focus on stocks that deliver strong growth could give these ETFs an edge.

It’s important to note, though, that over multiple decades, small-cap value stocks have typically outperformed other asset classes. With this in mind, the top Vanguard ETFs to own in the future just might include the Vanguard S&P Small-Cap 600 Value ETF (VIOV -0.06%) and the Vanguard Small-Cap Value ETF (VBR 0.17%). Only time will tell.