Buy, Sell, or Hold Vanguard’s Mega Cap Growth ETF Right Now | MGK

There’s a tech ETF that has been almost neck-and-neck with the S&P 500 in the past year and has built up a meaningful lead over the past five years. It’s the Vanguard’s Mega Cap Growth ETF (NYSEARCA:MGK | MGK Price Prediction). This ETF tracks the price of the CRSP US Mega Cap Growth Index, which in turn tracks companies with high “growth” characteristics like high earnings or sales growth.

The top holdings of this ETF are what you’d expect in a growth-focused ETF, but with greater concentration. Nvidia (NASDAQ:NVDA) comes with a 13.75% weighting, followed by Apple (NASDAQ:AAPL) at nearly 11.8%. The weightings then decline progressively, but the top 10 still account for 66.5% of holdings.

Before we look into whether or not it is worth leaning into this concentration, we need to look into MGK itself.

Very techy, but still mediocre

The top ten holdings are almost all tech, except for Eli Lilly (NYSE:LLY). You’re looking at 55.3% exposure to tech stocks, followed by 17.2% from the Communication industry, but even that hasn’t been enough for MGK to gain a meaningful lead over the benchmark S&P 500 index.

Dividends reinvested, MGK is up 110% over the past five years vs. the S&P 500’s 92%. That’s worse than what the Invesco QQQ ETF (NASDAQ:QQQ) has gotten you over the same timeframe, that too with less tech exposure. Of the QQQ’s holdings, tech constitutes 54.25%, with Communication at 15%.

Thus, this is truly a mediocre ETF in my eyes. It has leaned into some heavyweight winners, but many of them are yesterday’s winners.

So, what’s good about the MGK ETF?

The only thing that I do think makes this ETF worth owning is the 0.05% expense ratio, or just $5 per $10,000. If you are a strong believer in the biggest tech companies and you want to “set it and forget it,” you can put some money here. But again, you’re going to have to wait for many years before these hyperscalers start seeing any returns from the buildout, and your tech returns will see dilution with dozens of other holdings.

Moreover, you can own this instead of the QQQ if you are adamant about owning fast-growing major financial companies under the same umbrella. The QQQ tracks the Nasdaq-100, so it excludes every NYSE-listed company and also gets rid of financials by rule. MGK does not do this and keeps financials inside the ETF. But again, these financial stocks still constitute a mere 4.5% of its holdings.

2025-2026 has been a rough mean-reversion year for mega-cap concentration, with the equal-weight S&P and small/mid caps catching some bid. If we see a repeat of 2024 in 2027 with hyperscalers receiving early return on investment from the buildout, MGK could deliver good returns.

Buy, hold, or sell MGK?

MGK is not a competitor to the S&P 500. It’s a low-cost concentrated mega-cap growth vehicle for people who already have a core S&P holding and want a satellite tilt.

If you are adamant and you aren’t shaken off by a selloff, you can buy and hold MGK for a very long time and keep reinvesting. The tiny expense ratio can bring the equation to your favor over decades. Moreover, if hyperscalers see high compute demand terminally, the higher cash flow could finally make them deliver more upside than what AI hardware stocks are doing today.

All that said, I don’t think it is worth it at the end of the day. The best strategy you could adopt right now is a barbell strategy. Hold some dividend and defensive stocks to get income and keep reinvesting that on one end, and have aggressive AI hardware stocks on the other end. An ETF that has lots of exposure to AI software stocks is no longer a must-buy in this environment due to how much they are spending and the disruption AI is causing to them. I’d sell MGK.