Key Points
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The Vanguard Russell 1000 Value ETF has outpaced the S&P 500 and Nasdaq Composite this year due to its diversified portfolio.
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VONV has less exposure to tech stocks, which has helped it weather the AI correction while delivering positive returns for long-term investors.
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History suggests that the S&P 500 and Nasdaq Composite will gain ground on VONV if the AI trade heats up again.
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The Vanguard Russell 1000 Value ETF (NASDAQ: VONV) has outperformed the S&P 500 and Nasdaq Composite this year. The Vanguard ETF has a 0.06% expense ratio and has produced an annualized return of 12.1% over the past decade.
Past results do not guarantee future outcomes, but a closer look at this Vanguard ETF hints at long-term potential.
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It’s not just tech
One of the glaring weaknesses of the S&P 500 and Nasdaq Composite has been their heavy exposure to tech stocks. This allocation has helped these two benchmarks deliver solid long-term returns, but the focus on tech stocks has been less attractive, with several big tech stocks like Meta Platforms (NASDAQ: META), Nvidia (NASDAQ: NVDA), and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) down year to date.
Tech is the largest component of the Vanguard Russell 1000 Value ETF, but it only makes up 22% of the fund’s total holdings. The S&P 500 and Nasdaq Composite have much deeper exposure to that industry.
The top 10 holdings also aren’t just tech stocks. JPMorgan Chase (NYSE: JPM) and ExxonMobil (NYSE: XOM) also show up in the top 10 positions. Those holdings are part of a vast portfolio that contains more than 800 stocks, and that can minimize losses while introducing upside, as we have seen with this Vanguard ETF compared to the S&P 500 and Nasdaq Composite.
Can the gap continue to grow?
Although the Vanguard Russell 1000 Value ETF has crushed two key benchmarks this year, the picture looks different if you zoom out. This Vanguard ETF falls behind the two benchmarks if you look at 10-year returns, and history may repeat.
It ultimately depends on how you feel about the AI boom. Not only has artificial intelligence practically carried the stock market to new highs in recent years, but it also influences each of these investments.
The Vanguard Russell 1000 Value ETF has less exposure to AI than the S&P 500 and Nasdaq Composite. Investors who are wary of an AI meltdown may want to prioritize the Vanguard fund over the two well-known benchmarks. However, the S&P 500 and Nasdaq Composite should catapult past the Vanguard Russell 1000 Value ETF if AI concerns fade into the background and bullish momentum resurfaces.
The Vanguard Russell 1000 Value ETF is simply the least risky of the three options, while the Nasdaq Composite has the most exposure to tech stocks.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, JPMorgan Chase, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.
