Vanguard Mid-Cap Growth Index Fund Admiral Shares VMGMX

Vanguard Mid-Cap Growth Index’s razor-thin expense ratio and broad diversification across the mid-cap growth segment make it a compelling option.

The fund tracks the CRSP US Mid Cap Growth Index, which captures the faster-growing side of the mid-cap market. Investor sentiment around their superior growth prospects tends to drive the high valuations of these stocks. These valuations represent the market's consensus opinion, but they may not always be justified, making this a relatively volatile market segment. While mid-cap stocks constitute most of the fund, larger stocks are also present, which should help temper volatility.

Market-cap weighting is an efficient way to allocate the portfolio because it harnesses the market's consensus opinion on the relative value of each stock. Stocks that grow in size take up a larger share of the portfolio, while smaller companies that may be struggling will take on a less important role. Generous buffers around the fund's size and style constraints improve the breadth of the portfolio and help tame turnover.

The portfolio's sector complexion largely resembles the Morningstar Category, with a handful of differences. Like most peers, technology and industrial stocks take center stage, collecting 24% and 20% of the portfolio, respectively, almost identical to the category norm. The portfolio’s healthcare allocation lags the category average by about 5 percentage points and represents the largest sector-weighting discrepancy from the norm. To make up for that deficit, the fund allocates a little more than average to utilities and real estate stocks. These differences are small, however, and allow for the fund’s low fee to carve a durable edge against higher-cost peers.

Buffer rules around the fund's size constraints, coupled with market-cap weighting, allow it to capitalize on strong performance in its largest stocks. Index fund peers without these rules may be forced to sell the stocks sooner, realizing less of their gain. Generous buffer rules let them grow with fewer restrictions, and market-cap weighting gives them greater prominence.

Larger stocks like Palantir Technologies, Amphenol, and Arista Networks contributed greatly to the fund's long-term outperformance. The fund outpaced its average peer by 1.05 percentage points annualized since it started following its current benchmark in April 2013 through November 2025.

Morningstar has agreed to acquire the Center for Research in Security Prices, the provider of the index tracked by this fund, but the transaction has not yet closed. Morningstar analysts work independently of the index business, and their fund ratings for products tracking CRSP indexes are based solely on the fund’s investment merits.

The strategy effectively represents the contours of the mid-cap growth market and diversifies away most stock-specific risk with its broad reach. It earns an Above Average Process Pillar rating.

The CRSP US Mid Cap Index excludes the largest 70% and smallest 15% of US stocks by total market capitalization. CRSP buckets each eligible constituent in the corresponding growth or value index based on its composite style score. Each index weights constituents by float-adjusted market cap. The growth index collects those landing in the faster-growing half of the mid-cap universe. Stocks that land near the value/growth border may have their market cap split across value and growth indexes, but such instances are rare; the mid-cap growth and value indexes share about 2% of holdings.

Market-cap weighting is an inherently low-turnover approach, and generous buffer rules and trading windows further help tame turnover and associated trading costs. For a holding to move into an adjacent index, its style traits or market cap must change considerably. Should that occur, the fund initially trades 50% of the stock's market cap to protect against one-off fluctuations. This has put a lid on turnover, which has averaged 21% annually since 2015. CRSP spreads trades over five days to mitigate market-impact costs at each quarterly rebalance. These unique steps should reduce unnecessary turnover and marginally improve returns over time.

The portfolio effectively represents the mid-cap growth market segment, allowing its low fee and sound diversification to translate into a performance edge. The fund holds more than 120 stocks, with 21% of assets concentrated in the top 10. Only four stocks claim more than 2% of the portfolio, effectively spreading risk across its broad allocation.

Factor exposures closely mimic the category average, apart from size. Generous buffer rules allow relatively large stocks to stay in this portfolio for longer than competitors. This, coupled with market-cap weighting, can lead to acute sector biases relative to the category average and push the fund’s average market cap higher than the norm. With an average market cap of USD 46.8 billion, the fund's average constituent is about USD 20.5 billion larger than the category norm. This is not a bad thing, though. Larger stocks are typically more stable than their smaller counterparts, which may help tame volatility and protect the fund during particularly stressed periods.

Larger businesses also usually possess stronger competitive advantages than smaller ones—competitive advantages investors are willing to pay up for. About a third of portfolio companies earn a wide Morningstar Economic Moat Rating, or 3.4 percentage points more than the average peer.

Vanguard's equity index group earns an Above Average People Pillar rating for its well-supported and stable management team adept at leveraging Vanguard's comprehensive resources. Its portfolio managers benefit from the firm's global infrastructure and advanced portfolio management technology, which facilitates cost-efficient trading around the globe. The infrequent turnover of managers, coupled with Vanguard's practice of rotating them across various funds, enhances their expertise and understanding of different market segments.

The fund's managers directly handle trading, providing them with deeper insights into the portfolio's operations than a stand-alone trader might have. They are backed by a global team of dedicated personnel and employ sophisticated, scalable technology to minimize their workload and enhance tracking accuracy. Vanguard's independent risk-management team plays a crucial role in ensuring its funds adhere to predetermined tracking tolerances. It collaborates closely with the managers to oversee trades and address potential issues proactively. Vanguard compensates managers based on tracking error and excess return metrics to foster a culture of accountability and ensure that the management team's interests are closely tied to investors'.

Vanguard maintains its High Parent Pillar rating as it continues to grow under new leadership.

CEO Salim Ramji has had a busy first year captaining Vanguard’s crew, and the ship remains pointed in the right direction. The firm made its largest round of fee cuts in early 2025, which came at an estimated cost of USD 350 million. It established a separate division dedicated to its advice and wealth management efforts, a sign that it wants to seriously compete within those lines of business. Asset growth has continued to be a huge success. Only BlackRock’s inflows rival the money Vanguard is taking in. Likewise, the number of clients it serves has more than doubled since 2015.

Despite that success, an ever-growing number of clients has presented a challenge: Vanguard can’t grow its services fast enough to keep up with demand. In some instances, it has had to curb certain services and capabilities or raise fees on others to cope, causing some loyal clients to criticize what they perceive as deteriorating services.

Vanguard has ambitions to bring its disruptive legacy to the bond market. It created roughly a dozen low-cost bond exchange-traded funds for US investors and several others abroad over the 12 months through June 2025. All have low fees in their respective categories, and the actively managed strategies align with Vanguard’s philosophy. They are relatively easy to understand and are conservatively managed.

Vanguard has another opportunity to prove that clients are still its priority. On the surface, its endeavor into the high-fee deal-making world of private assets alongside Wellington and Blackstone looks like a cultural mismatch. So far, the collaboration hasn’t produced anything that’s concerning.

Low fees helped this fund carve a durable advantage. Its performance has resembled the category average since adopting its current index in April 2013. The exchange-traded fund share class outpaced the category average by 1.05 percentage points annualized from April 2013 through November 2025. Its larger market-cap orientation helped contain drawdowns but not overall volatility. The fund's standard deviation of returns was barely less than the category norm, but it captured 95% of the average peer's downside since 2013.

Performance will not always match the category norm, though. Market-cap-weighting and CRSP's size and style constraints exclude some of the category's popular holdings and overweight others. Spotify and Arch Capital Group, companies common to competitor portfolios, enjoyed strong performance lately. Their absence in this portfolio proved to be a drag. However, Constellation Energy—the fund's largest holding—is largely absent from competitors' portfolios and provided this fund with a boost.

Despite some differences, the fund remains an excellent representative of the mid-cap growth category and should perform well when growth stocks are in favor. Additionally, its low expense ratio presents a low hurdle for this fund to expand its advantage going forward.

Vanguard Mid-Cap Growth Index Admiral's Prospectus Adjusted Expense Ratio is 0.07% per year. It places it in the cheapest quintile of the Morningstar US Fund Mid-Cap Growth Category, where the median fee is 0.96% per year. This cost positioning translates into a Medalist Rating Price Score of 2.44, which reflects its relative price positioning within the category. The Price Score ranges from -2.50 (most expensive) to +2.50 (cheapest), with higher scores indicating better cost competitiveness.