The U.S. stock market has a handful of important benchmarks, but none are as tracked or important as the market. S&P 500. Tracking the 500 largest American companies on US stock markets is actually the The benchmark of the stock market by most accounts.

Stocks or exchange-traded funds (ETFs) often do this when tracking their performance and evaluating their returns. S&P 500. If your returns are higher, you’re doing well overall; If it is lower, this is generally considered poor performance.

If you’re looking for an ETF with a history of falling into the former category, Vanguard Growth ETF (VUG -2.14%) fits the bill.

This ETF shows large caps and growth can coexist

As the name suggests, this ETF is growth stocks. But not just any growth stock; large-cap growth stocks. This is important because the size of the companies in this ETF provides benefits you don’t typically see in smaller growth stocks.

You can think of recent growth stocks as young. publicly traded companiesbut this is not always the case. A growth stock is any stock that is fast-growing financials (based on their sector) and has the potential to beat the market. Its size is unimportant.

Focusing on large-cap growth stocks, this ETF allows you to invest in companies with solid financials and proven business models, while also positioning you to outperform the market (relative to S&P 500 returns). The best of both worlds.

A history of outperforming the S&P 500

Here’s how this ETF’s returns have improved relative to the S&P 500 since it was created in January 2004.

VUG Total Return Level data Y Charts

It’s one thing for an ETF to say its focus is to outperform the market. It’s a different feeling when the ETF actually has a history of doing this. For two decades, this ETF has been trusted by investors seeking market-beating returns.

Of course, just because this has happened doesn’t mean it will continue, but this ETF is well-equipped to continue its momentum for the foreseeable future. It’s predominantly in the tech sector (57.7% of the ETF), so that must be the catalyst for much of its growth, or lack thereof. There has been an explosion with the emergence of artificial intelligence. cloud industryThe technology industry has many growth opportunities due to the increasing demand for cybersecurity and other new developments.

Although it is geared towards the technology sector, the ETF also includes companies from 10 other major sectors, which could help fill some of the slack if needed.

Source: Vanguard. Percentages as of September 30.

As the top three assets go, so does the ETF

There are many great aspects to this ETF. But its only (slight) downside is the concentration of top-tier assets. Below are the ETF’s 10 largest holdings and how much of the ETF they make up:

Source: Vanguard. Holdings as of September 30.

The 10 largest holdings account for more than 57% of the ETF; The S&P 500’s top 10 holdings account for just over 34%. But it’s not the top 10 that I want to focus on. The focus should be on Apple Microsoftand Nvidia make up about a third of the 183-stock ETF.

To be fair, these are three world-class companies, each with a track record of market-beating returns. That’s great when things are going well, but when they’re not, things can get ugly. Take 2022, for example, when many large growth stocks are experiencing a sharp selloff.

VUG data Y Charts

Due to concentration, this ETF shouldn’t be the foundation of most portfolios, but it can be a great addition that allows investors to take advantage of high-flying technology stocks.