What is the best performing Vanguard ETF of 2024 so far?

Vanguard makes a lot of investors happy these days. Forty-two of the 86 exchange-traded funds (ETFs) managed by the company have returned double-digit returns to date. Sixteen Vanguard ETFs claim a total return of at least 20%. What is the best performing Vanguard ETF of 2024 so far?

Top contenders

You might be surprised by some of the top contenders in Vanguard’s ETF family. For example the Vanguard Utilities ETF (VPU -0.76%) ranked as the best-performing Vanguard ETF of 2024 for much of the past few weeks. Its total return stands at 25.7% at the time of writing, enough to rank third among all Vanguard ETFs.

Utility stocks typically aren’t the most exciting performers. However, increasing expectations that the Federal Reserve would cut rates and ultimately an actual rate cut by the Fed provided a nice tailwind for the utilities sector and the Vanguard Utilities ETF.

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The Vanguard Communication Services ETF (VOX 2.52%) is the second best performing Vanguard ETF of the year so far, with a total return of 27.3%. Almost all of the total return is due to share price appreciation, as many of the stocks owned by the ETF pay no or relatively small dividends.

Three stocks have been particularly important to the Vanguard Communication Services ETF’s banner year. Facebook parent Metaplatforms makes up 23.2% of the ETF’s portfolio. The stock price is up about 58% year to date. The Class A and Class C shares of parent company Google Alphabet together make up 21.1% of the Vanguard Communication Services ETF’s total holdings. Both Alphabet shares are up 21% in 2024.

The best performing Vanguard ETF so far this year

However, no Vanguard ETF outperforms the Vanguard S&P 500 Growth ETF (GUARDIAN 2.52%) this year. The total return of this ETF is 28%. The share price is up more than 27% year to date.

VOOG data from YCharts

The Vanguard S&P Growth ETF attempts to track the performance of the S&P 500 Growth Index. This index includes members of the S&P500 classified as growth stocks based on revenue growth, momentum and the ratio of earnings growth to stock price.

This Vanguard ETF currently owns 234 shares. That’s the top five holding companies Apple, Microsoft, Nvidia, Amazonand Meta. These stocks make up approximately 45.8% of the ETF’s portfolio. Nvidia has been a particularly big winner this year, with its share price up 175%.

Since its inception in September 2010, the Vanguard S&P 500 Growth ETF has delivered an average annualized total return of 16%. As is the case with most Vanguard funds, fees haven’t had much of an impact on returns. The ETF’s annual expense ratio is a low 0.1%.

Is the Vanguard S&P 500 Growth ETF Still a Good Choice to Buy?

There is no guarantee that the Vanguard S&P 500 Growth ETF can continue to generate such high total returns. The fund’s valuation could spell its downfall, as the stocks it holds have an average price-to-earnings ratio of 34.4.

Although the portfolio includes a large number of stocks, this Vanguard ETF does not provide as much diversification as many investors would like. The ETF’s top holdings make up a large percentage of the total portfolio and tend to move in the same direction.

However, a key reason why the Vanguard S&P 500 Growth ETF’s top stocks have performed well lately is the continued rise in demand for artificial intelligence (AI) applications. If you believe demand for AI will continue to grow (which seems likely at this point), this high-flying Vanguard ETF should still be a good choice to buy right now, despite its high valuation.