Last year, the Vanguard S&P 500 Growth ETF ranked as the biggest winner among Vanguard’s exchange-traded funds (ETFs). That’s not surprising. The ETF owns big stakes in stocks like Nvidia, Meta Platforms, Amazon, and Apple, all of which soared in 2024.
However, the Vanguard S&P 500 Growth ETF isn’t the best performer in the Vanguard family so far in 2025. Instead, it’s an ETF that doesn’t own a single share in Nvidia, Meta, Amazon, Apple, or any other so-called “Magnificent Seven” stock. In fact, this Vanguard ETF doesn’t hold any stock in the S&P 500.
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Look across the pond
Which Vanguard ETF am I talking about? It’s the Vanguard FTSE Europe ETF (VGK -0.41%). This fund is up roughly 11% year to date, a higher return than any other Vanguard ETF.
The ETF’s name gives away its focus. The Vanguard FTSE Europe ETF owns only the stocks of companies based in Europe. It attempts to track the performance of the FTSE Developed Europe All Cap Index, which includes companies located in the following major European markets: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.
This Vanguard ETF currently owns 1,269 stocks. No single holding makes up more than 2.43% of the entire portfolio. The ETF’s top five positions are German software company SAP, Dutch semiconductor-fabrication equipment leader ASML Holding NV, Danish drugmaker Novo Nordisk, Swiss food and beverage company Nestlé, and Swiss healthcare giant Roche Holding AG.
Like all Vanguard ETFs, the Vanguard FTSE Europe ETF is cost-effective for investors to own. Its annual expense ratio is a low 0.06% compared to an average of 0.93% for similar funds.
Why is this Vanguard ETF outperforming so far in 2025?
The Vanguard FTSE Europe ETF has emphatically not been the best Vanguard fund to own over the long term. Since its inception on March 4, 2005, the ETF’s average annual return is only 5.14%. The S&P 500 delivered a return roughly 10.7 times higher during the period. Including dividends helps narrow the gap somewhat. However, the S&P 500’s total return was still more than 3.6 times greater than the total return of the Vanguard FTSE Europe ETF.
^SPX data by YCharts.
The Vanguard FTSE Europe ETF performed dismally in 2024. While the S&P 500 jumped 23%, this Vanguard ETF declined by nearly 2%.
So, what happened to turn things around this year? The simple answer is that several of the European stocks in the ETF’s portfolio have started 2025 with a bang.
For example, SAP’s shares have soared close to 17% year to date. Roche isn’t far behind. British-Swedish drugmaker AstraZeneca, Nestlé, Novartis, and British financial services giant HSBC Holdings, all top 10 holdings for the Vanguard FTSE Europe ETF, have risen by double-digit percentages. Many European stocks have risen in recent weeks as expectations increased for a ceasefire in Ukraine.
Is the Vanguard FTSE Europe ETF a no-brainer buy?
Everybody loves a winner. Is the Vanguard FTSE Europe ETF a no-brainer buy? I wouldn’t go that far.
It’s not a bad idea to diversify your portfolio geographically. If you own nothing but U.S. stocks, adding the Vanguard FTSE Europe ETF could be a practical thing to do.
However, keep in mind that just because this Vanguard ETF is outperforming all other Vanguard ETFs now doesn’t mean it will continue to do so. A deal to end hostilities between Russia and Ukraine could fail to materialize. The prospect of steep tariffs imposed by the Trump administration on European imports could also derail the momentum of the Vanguard FTSE Europe ETF.
We’re less than one-sixth of the way through 2025. While the Vanguard FTSE Europe ETF could deliver solid gains this year, I predict other Vanguard ETFs will be bigger winners before the year is over.
HSBC Holdings is an advertising partner of Motley Fool Money. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Amazon, Apple, and Meta Platforms. The Motley Fool has positions in and recommends ASML, Amazon, Apple, Meta Platforms, and Nvidia. The Motley Fool recommends AstraZeneca Plc, HSBC Holdings, Nestlé, Novo Nordisk, and Roche Holding AG. The Motley Fool has a disclosure policy.
