The Vanguard Morningstar Growth ETF (NYSEMKT:VUG) has had a strong 2026, with shares trading near $90, up about 10% this year. This performance caps a decade-long run where the fund's return averaged around 18% annually with reinvested dividends. However, the fund's future growth may not match its past success.
As of June, the fund's three largest holdings, Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG), made up around 35% of its assets. These companies continue to show strong earnings growth, with Nvidia's adjusted earnings per share more than doubling in its latest quarter. Apple and Alphabet also reported significant earnings increases, though some gains were influenced by non-operating factors.
Looking ahead, the fund's earnings growth may slow. The past five years saw earnings rise around 32% annually, but the fund's largest companies are now so massive that maintaining that pace seems unlikely. The forecast assumes earnings will grow around 15% a year through 2030, which is still robust but more realistic for such large businesses.
Valuation is another key factor. The fund's price-to-earnings ratio is around 37 times earnings, a premium that may not be sustainable. Assuming the ratio drops to 30 by 2030, a $10,000 investment today could grow to around $15,000 by the end of the decade. This projection is more conservative than the fund's past 18% annual returns but still represents a solid return.