Why Vanguard’s Mega Cap Value ETF is a Smart Buy Now

Investors often seek out dividend-paying stocks and exchange-traded funds (ETFs) to enhance their passive income streams, ensuring their returns aren’t solely tied to stock price increases. Notably, many value and income stocks have outperformed growth stocks this year. When market sentiment turns negative, investors tend to favor companies that exhibit strong current performance over those promising future growth.

Here’s why the Vanguard Mega Cap Value Index Fund ETF (NYSEMKT: MGV) is appealing for value investors, and why now may be a good time to consider purchasing it.

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Image source: Getty Images.

Performance in 2023

As of Thursday’s close, the Vanguard Mega Cap Value ETF has increased by 0.5% this year, outpacing both the broader S&P 500 (SNPINDEX: ^GSPC) and the Nasdaq Composite (NASDAQINDEX: ^IXIC).

MGV data by YCharts

The Mega Cap Value ETF and the Vanguard Mega Cap Growth Index Fund ETF (NYSEMKT: MGK) represent two distinct approaches to investing. The Mega Cap Value ETF focuses on industry-leading stocks primarily from value-oriented sectors such as financials, consumer staples, industrials, healthcare, and energy. In contrast, the Mega Cap Growth ETF leans toward technology, consumer discretionary, and communications.

Due to the prevalence of growth stocks among the largest companies in the S&P 500, the Mega Cap Growth ETF closely mirrors the index. It allocates significant weight to companies including Apple, Microsoft, and Nvidia, while the Mega Cap Value ETF does not feature these tech giants.

Comparing the top holdings, we can see notable differences between the Vanguard S&P 500 ETF (NYSEMKT: VOO) and the two mega cap funds.

Holding (in Order of Highest Weighting)	Vanguard Mega Cap Value ETF	Vanguard Mega Cap Growth ETF	Vanguard S&P 500 ETF
1	Berkshire Hathaway	Apple	Apple
2	JPMorgan Chase	Microsoft	Microsoft
3	Broadcom	Nvidia	Nvidia
4	UnitedHealth Group	Amazon	Amazon
5	ExxonMobil	Meta Platforms	Alphabet
6	Walmart	Alphabet	Meta Platforms
7	Home Depot	Tesla	Tesla
8	Procter & Gamble	Eli Lilly	Broadcom
9	Johnson & Johnson	Visa	Berkshire Hathaway
10	AbbVie	Broadcom	JPMorgan Chase

Data source: Vanguard.

The Mega Cap Value ETF has a significantly lower concentration of its top holdings compared to both the Mega Cap Growth ETF and the S&P 500 ETF. The top ten holdings make up only 28.3% of its total assets, whereas the Vanguard S&P 500 ETF’s top ten represent 37.6% and the Mega Cap Growth ETF’s top holdings account for an overwhelming 65.4%. Furthermore, the Mega Cap Growth ETF shares its top seven holdings with the S&P 500 ETF, also known as the “Magnificent Seven,” which have driven the stock market’s recent highs, yet they have lagged the S&P 500’s returns in 2025. This highlights the risks of being heavily reliant on a few stocks, which can produce significant gains but can also lead to quick declines.

Value and Yield Advantages Over the S&P 500

Due to its emphasis on value sectors, the Mega Cap Value ETF offers a more attractive valuation along with a higher yield than the S&P 500 ETF. As of Vanguard’s last update on February 28, the fund had a yield of 2% and a price-to-earnings (P/E) ratio of 20.4 as of January 31. In comparison, the S&P 500 ETF yielded 1.2% with a P/E ratio of 27.5.

While focusing primarily on yield is common among some ETFs, the Mega Cap Value ETF has demonstrated impressive long-term performance. Over the past decade, top U.S. value stocks have steadily increased in market capitalization, albeit at a slower pace than their growth counterparts. Consequently, while the Mega Cap Growth ETF has outperformed the S&P 500 over the last decade, the Mega Cap Value ETF has underperformed.

Nonetheless, for investors wary of risk or those looking to allocate new capital into the stock market without diving into growth stocks, the Mega Cap Value ETF could be a more suitable option.

Harnessing the Potential of the Mega Cap Value ETF

With a low expense ratio of just 0.07% and a nominal minimum investment of $1, the Mega Cap Value ETF provides an accessible way to gain exposure to a diverse range of blue-chip companies from value-oriented sectors. It is crucial to invest in the Mega Cap Value ETF for the appropriate reasons.

Switching from growth stocks to value stocks out of fear, or vice versa during periods of optimism, can lead to missed opportunities. Instead, a steady and measured approach would allow the Mega Cap Value ETF to effectively contribute to an investor’s long-term financial strategy.