Many Wall Street analysts think the S&P 500 will rise for the third consecutive year in 2025. Projections vary, but the consensus forecast appears to be that the index could jump in the ballpark of 10%. The S&P is roughly one-third of the way to hitting that mark already.
If Wall Street is right, investors could buy an S&P 500 index exchange-traded fund (ETF) such as the Vanguard S&P 500 ETF (VOO -0.97%) and enjoy a decent return. But I think there are even better options for investors who want even greater gains. I predict these two Vanguard ETFs will trounce the S&P 500 this year.
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Financially speaking
If I had to pick only one Vanguard ETF most likely to beat the S&P 500 in 2025, it would be the Vanguard Financials ETF (VFH -0.45%). This fund focuses only on the stocks of companies in the financial services sector.
The Vanguard Financials ETF currently owns 409 financial stocks. Its top holdings include JPMorgan Chase, Berkshire Hathaway, Mastercard, Visa, and Bank of America. Because the ETF is weighted by market cap, these mega-cap stocks make up 30.7% of its total portfolio.
This fund has only delivered an average annual return of 6.7% since its inception in January 2004. However, it has soared over the past 12 months, handily outperforming the S&P 500.
You might have noticed on the chart that the Vanguard Financials ETF really opened up a lead on the S&P 500 in November 2024. It’s no coincidence that’s when the U.S. elections were held. The anticipated policies of the second Trump administration could be especially favorable to financial stocks, especially with the prospects of reduced regulatory burdens.
Keeping the momentum going
The Vanguard S&P 500 Growth ETF (VOOG -0.93%) ranked as the best-performing Vanguard ETF in 2024. This fund is up more than 31% over the last 12 months compared to a gain of 23% for the S&P 500.
Growth is what the Vanguard S&P 500 Growth ETF is all about. The fund attempts to track the performance of the S&P 500 Growth Index, which includes growth companies in the S&P 500.
This Vanguard ETF owns 209 stocks with a median market cap of $1.1 trillion. Its top holdings include Nvidia, Apple, Microsoft, Facebook parent Meta Platforms, and Amazon. All of these stocks except Microsoft have delivered greater gains than the S&P 500 over the past 12 months.
Can the Vanguard S&P 500 Growth ETF keep its momentum going? I think so. The seemingly insatiable demand for artificial intelligence (AI) continues to serve as a major tailwind for many of the top growth stocks in the S&P 500. Although concerns about a threat from the Chinese AI company DeepSeek caused some of the stocks to stumble in recent weeks, especially Nvidia, I suspect this will be only a temporary downturn.
Other candidates
While I predict the Vanguard Financials ETF and the Vanguard S&P 500 Growth ETF will trounce the S&P 500 this year, I acknowledge the possibility that other Vanguard ETFs might perform even better. For example, the Vanguard Growth ETF (VUG -1.04%) was a big winner in 2024 and could step into the forefront in the coming months.
I also think small-cap stocks could be ready to outperform large-cap stocks. This could set the stage for funds including the Vanguard Small Cap ETF (VB -1.01%) and Vanguard Small Cap Value ETF (VBR -0.90%) to deliver impressive gains.
JPMorgan Chase is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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. Keith Speights has positions in Amazon, Apple, Berkshire Hathaway, Mastercard, Meta Platforms, Microsoft, Vanguard S&P 500 ETF, and Vanguard Small-Cap Value ETF. The Motley Fool has positions in and recommends Amazon, Apple, Bank of America, Berkshire Hathaway, JPMorgan Chase, Mastercard, Meta Platforms, Microsoft, Nvidia, Vanguard Index Funds-Vanguard Growth ETF, Vanguard Index Funds-Vanguard Small-Cap ETF, Vanguard S&P 500 ETF, and Visa. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.