Key Points
The Vanguard Morningstar Value ETF has gained around 18% in 2026, topping the growth fund's 13%.
The year after each of the value fund's past three wins, the growth fund came out on top.
At the end of June, around 63% of the growth fund's assets were in its 10 biggest holdings.
The Vanguard Morningstar Value ETF (NYSEMKT:VTV) is up about 18% this year and the Vanguard Morningstar Growth ETF (NYSEMKT:VUG) has returned about 13%, as of this writing. That doesn't happen much. From 2012 through 2025, the value fund ended a calendar year ahead of the growth fund only three times, according to Vanguard's published returns -- in 2013, 2016 and 2022.
(Vanguard added "Morningstar" to both funds' names in July, though it said the change wouldn't affect how the funds are run. The returns here are Vanguard's numbers, which include dividends and are based on the value of each fund's holdings instead of its share price.)
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But is this year's lead a good reason to choose the value fund over the growth fund now?
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Three wins, three comebacks
The first win was hardly a win at all.
In 2013, the value fund gained 33% while the growth fund returned 32.4%. The next year, the growth fund inched back ahead, 13.6% to 13.2%.
The 2016 win was more decisive. The value fund climbed around 17% that year and the growth fund managed just 6%. But the order switched in 2017, when the growth fund returned nearly 28% and the value fund returned about 17%.
And then came 2022, when value won by losing less. The value fund dipped around 2% in a year the growth fund sank about 33%. In 2023, the growth fund bounced back and gained about 47%, while the value fund returned about 9%. Even with that comeback, the growth fund ended 2023 slightly lower than it started 2022.
Put another way, the growth fund did better in the year after all three wins. Granted, three cases are a small sample, and the pattern might not continue.
It's also worth mentioning that the value fund made money in each of those follow-up years. Its owners weren't hurt by sitting tight, but they earned less than the growth fund's owners did.
This year's lead was built in one quarter
I also think this year's lead is less sturdy than it looks.
The value fund built all of it between January and March, rising around 3% as the growth fund lost about 10%. When March ended, the gap between them was roughly 14 percentage points.
Since then, the growth fund has done better. By June 30, the value fund was up around 15% for the year while the growth fund was up about 6%, a gap of 9 points. As of this writing, the gap is about 5 points.
With over two months to go in the year, a lead that's shrunk by around two-thirds since March could still vanish.
Which fund makes more sense now?
I don't think this year's returns should decide which fund an investor picks. What each fund holds, and what those stocks cost, arguably matters more.
The value fund trades at around $221 a share as of this writing and the growth fund at about $92, but a lower share price doesn't make a fund cheaper. What matters is what the stocks inside cost compared to their profits. As of Aug. 31, the value fund's stocks traded at around 21 times earnings, according to Vanguard, and the growth fund's stocks traded at 31 times earnings.
The two funds split the same index of big U.S. companies into a value side and a growth side. And the growth side is a lot more concentrated. At the end of June, its 10 biggest holdings made up around 63% of the fund's assets, and tech stocks were about 69% of the fund. For the value fund, the numbers were about 24% and 12%.
Granted, the growth fund has earned its higher price so far. In the 10 years through 2025, it returned around 17.5% a year, and the value fund returned about 11.7% a year. But with its stocks at 31 times earnings and most of its money in 10 holdings, the growth fund probably needs those companies to keep growing fast.
In the end, I wouldn't pick the value fund just because it's leading this year, and I wouldn't write off the growth fund because it's behind. I'd say the value fund's cheaper stocks and broader spread of holdings are better reasons to consider it. And for investors who can't decide between the two, owning both looks like a sensible answer.
Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Morningstar Growth ETF and Vanguard Morningstar Value ETF. The Motley Fool has a disclosure policy.