The market has been a wild roller coaster ride these past five years. As the longest-running bull market hit new highs in early 2020, the pandemic struck causing the Nasdaq 100 to lose more than a quarter of its value in a matter of weeks. 

Yet immediately after, the technology-oriented reversed course to go on a new 21-month tear, surging 139%, only to make another u-turn and lose one-third of its value in 2023. The Nasdaq 100 has doubled in value since that low point. 

This white-knuckle ride has only served to prove the adage that the only constant is change. While no one knows where the stock market will head tomorrow, let alone over the coming year, investors looking to trounce the index in 2025 should look no further than the two Vanguard funds below.

The Nasdaq 100 index, of course, is the 100 largest, non-financial companies listed on the Nasdaq stock exchange. Itis heavily weighted toward technology and growth stocks, including the so-called Magnificent Seven stocks like Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Amazon (NASDAQ:AMZN). It’s why it tends to serve as a high-growth stock benchmark. 

Vanguard exchange-traded funds (ETFs) are best-known as the premiere strategy for low-cost, passive indexing and broad diversification. 

Many will track specific sectors, regions, or asset classes, so not all will match the Nasdaq 100’s tech-heavy growth, but some Vanguard ETFs focus on technology or growth stocks, making them the leading contenders to outperform the tech-heavy index. The following two are the best positioned to do so.

Vanguard Information Technology ETF (VGT)

The Vanguard Information Technology ETF (NYSEARCA:VGT) tracks the MSCI U.S. Investable Market Information Technology index, focusing on tech companies like Microsoft (NASDAQ:MSFT), Apple, and Nvidia. The ETF has delivered total returns of 66% over the last three years, just surpassing the Nasdaq 100’s of 64%. The Vanguard ETF’s heavy weighting in mega-cap tech stocks gives it the top shot at beating the index, especially if Nvidia and other chipmakers continue their artificial intelligence-fueled surge for the coming year. 

All eyes will be on Nvidia on this Wednesday as it reports fourth-quarter results after the market closes. Most analysts expect the AI chipmaker to post stellar results for the quarter, but it will be its guidance for the coming year that sets the tone. If it has a robust outlook, it could set the stock and the sector on fire once more, though more muted guidance could send stocks careening lower.

Nvidia is the second largest holding in VGT at around 13%, second only to Apple and just ahead of Microsoft. 

Remarkably, over the last five years, the Vanguard ETF has done even better, beating the Nasdaq 100 145% to 138%.

While Vanguard is well-known as the low-cost leader in ETFs, with cheap expense ratios, VGT’s tiny 0.09% ratio ensures that virtually all of your money put into the ETF is working for you and not enriching the money-manager.

Vanguard Mega Cap Growth Index Fund ETF (MGK)

Traditionally, investing in large and mega cap stocks meant slow, but steady growth. However, that’s changed in recent years, the market’s biggest stocks are all fast-growing tech stocks. In fact, eight of the 10 largest companies are all tech companies.

The Vanguard Mega Cap Growth Index Fund ETF (NYSEARCA:MGK) tracks the CRSP U.S. Mega Cap Growth index, including many of the same tech giants as VGT, including Microsoft, Apple, and Amazon (which is technically classified as consumer discretionary but is seen by many as a growth-oriented tech stock). 

Over the past three years, MGK just eked out a win over the Nasdaq 100, offering total returns of 64.6%. Because its 50 to 60 largest growth stocks also include components of the index, it give MGK a strong overlap. However, its broader diversification has the potential to dilute its returns compared to Nasdaq 100, but that’s not how it has played out.

Now it did have an impact over the last five years, but not by much. Where the tech index gained 138%, the Vanguard Mega Cap ETF gained 126%, so you weren’t giving up much by investing in it, while gaining downside protection from the diversified portfolio. Moreover, Its expense ratio is even better than VGT at 0.07%.

Today, tech stocks are ascendant so that’s what MGK is heavily weighted towards, or 62.5% of its holdings. But if another sector rises strong and its leaders become mega cap giants, then the ETF will tilt towards them. It ensures that investors are always invested in the market’s biggest growth stocks, no matter what their underlying business is.

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