Two Vanguard ETFs are poised for outsized gains

Additionally, the fund's holdings have an average price-to-earnings (P/E) ratio of just 16.1, which is well below the S&P 500's average P/E ratio of nearly 27.3. This fact suggests that these smaller companies may be undervalued and their stock prices could rise as investors realize their growth potential.

Overall, the Vanguard Small-Cap Value Index Fund provides access to a variety of undervalued growth opportunities at exceptionally low costs, making it a compelling choice for long-term investors.

The Vanguard Growth Index Fund (NYSEMKT:VUG) targets mega-cap companies with an average market capitalization of $1.4 trillion that have above-average growth potential. Designed to track the performance of the CRSP US Large Cap Growth Index, this fund has an attractive expense ratio of 0.04% and has achieved a remarkable annual return of 15.1% over 10 years.

The Vanguard Growth Index Fund currently holds shares in 183 companies, many of which are leaders in the technology sector. The fund's largest holdings include technology companies such as Apple, MicrosoftAnd Nvidia.

The Vanguard Growth Index Fund's technical bias has allowed it to easily outperform the broader S&P 500 index this year. However, this trend of outperformance is nothing new.

Over the past 10 years, the Vanguard Growth Index Fund has delivered a total return of 319%, assuming distributions are reinvested in a tax-advantaged account. In comparison, the S&P 500 has returned 243% over the same period, highlighting the fund's superior growth profile.

Although the Vanguard Growth Index Fund carries the risks typical of growth investing, it has consistently proven to be a strong performer in both bull and bear markets.

The fund's focus on high-growth companies makes it an attractive option for risk-tolerant investors looking for outsized gains. And the extremely low expense ratio further increases the company's appeal by allowing investors to retain more of their returns over time.

Both the Vanguard Small-Cap Value Index Fund and the Vanguard Growth Index Fund offer attractive options for investors looking to expand their growth portfolios. These two Vanguard ETFs not only boast low costs, but also have strong potential for significant long-term growth.

The Vanguard Small-Cap Value Index Fund is positioned to benefit from a favorable economic environment as interest rates decline, which can boost consumer spending and investment in smaller companies. With a lower average price-to-earnings ratio compared to the S&P 500, these undervalued stocks have significant room to increase in value if the market recognizes their potential.

On the other hand, Vanguard Growth Index Fund focuses on large-cap companies with robust growth prospects, particularly in the technology sector. As innovation continues to drive economic growth, these companies are expected to outperform the overall market. The fund's historical performance with a strong track record of returns further supports its potential to outperform the S&P 500 over the next five years.

Before you buy shares of Vanguard Index Funds – Vanguard Growth ETF, you should consider the following:

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George Budwell has held positions at Apple, Microsoft and Nvidia. The Motley Fool holds positions in and recommends Apple, Microsoft, Nvidia and Vanguard Index Funds – Vanguard Growth ETF. The Motley Fool recommends Booz Allen Hamilton and recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.

Two Vanguard ETFs Poised for Outsized Gains was originally published by The Motley Fool