Attention: Lesser-Known VGK Outperforms VOO and SPY in Returns This Year

The Vanguard FTSE Europe ETF (VGK) has delivered a remarkable 32.97% return year-to-date, surpassing the performance of the S&P 500 ETFs by 79%. This significant growth is driven by VGKs broad exposure to over 1,200 stocks across various European sectors, with notable weightings in financials (22.79%) and industrials (20.19%).

In 2025, the S&P 500 has continued to show strong results, with Vanguards S&P 500 ETF (VOO) returning 18.43% and SPDR S&P 500 ETF (SPY) at 18.34% as of the latest data. These gains have largely been fueled by tech stocks, particularly the Magnificent 7, including Apple, Nvidia, and Microsoft, which dominate the top 10 positions in the S&P 500. However, VGK's performance has been largely unaffected by the AI-driven boom and instead reflects the strength of Europes diversified market.

While many of the most prominent S&P 500 companies are heavily reliant on AI technologies, VGKs holdings represent a more diverse mix of industries. Among its top 10 holdings are companies like Nestl, AstraZeneca, and LVMH, all of which are European firms excelling in sectors unrelated to artificial intelligence. Their performance underscores the resilience of traditional industries and the value they continue to offer investors.

VGKs composition is focused on companies in financials, healthcare, and industrials, rather than the AI-centric tech companies dominating the U.S. market. Notably, VGK's technology sector makes up just 8.27% of its portfolio, a far cry from the overwhelming presence of tech stocks in VOO and SPY. Instead, investors are drawn to VGKs strong sectors, such as financials (22.79%) and industrials (20.19%).

Why Has VGK Surpassed VOO and SPY?

VGKs exceptional performance this year is largely due to several factors that have worked in favor of European markets. One of the most notable developments was the impact of geopolitical tariff fears in March. While the Trump administrations tariff policies created turbulence in global markets, Europe was less affected, drawing investors seeking stability away from the volatility of the U.S. market.

Additionally, the rise of AI-driven companies, particularly those in the U.S., has raised concerns of an economic bubble. Michael Burry, famed for predicting the 2008 financial crisis, has been outspoken about his skepticism regarding the long-term sustainability of the AI boom. In contrast, VGKs emphasis on financials and industrials, which make up 44% of the ETF, offers a safer alternative for investors looking for less risk exposure.

Moreover, VGKs index includes more than 1,200 stocks across Europe and Scandinavia, providing broad diversification. Unlike the S&P 500, where a few mega-cap stocks drive much of the performance, VGK benefits from the strength of numerous companies across various sectors. This diversity in its holdings helps mitigate risk and provides opportunities for growth from multiple sources.

VGK's Holdings and Sector Distribution

VGKs top 10 holdings, as of the latest data, are:

• ASML Holding 2.91%
• SAP SE 1.87%
• AstraZeneca PLC 1.73%
• HSBC Holdings 1.70%
• Nestl SA 1.69%
• Novartis AG 1.62%
• Roche Holding AG 1.58%
• Shell PLC 1.54%
• Siemens AG 1.46%
• LVMH Mot Hennessy 1.26%

The sector breakdown for VGK shows a clear preference for financials, industrials, and healthcare, with technology making up a smaller portion of the funds holdings compared to its U.S. counterparts. The largest sector is financials (22.79%), followed by industrials (20.19%) and healthcare (12.92%). This diverse exposure has made VGK a popular choice for investors seeking stability in an otherwise volatile market.

Looking Ahead

As 2025 draws to a close, VGK continues to outperform its U.S. counterparts, and there are reasons to believe this trend could continue. While the S&P 500 is still benefiting from the strong performance of its tech stocks, Europes diversified market offers a counterbalance that many investors are turning to, especially as concerns about the AI bubble grow.

However, geopolitical risks and internal issues within the EU, such as tensions over migration policies, could pose challenges for European markets in the future. Nevertheless, as long as these issues do not destabilize the region, VGKs strong performance may continue to outpace traditional U.S. ETFs.

Sources:

• Pay Attention, Little Known VGK Has Nearly Doubled VOO and SPYs Returns This Year

Author: Olivia Parker
Olivia Parker is a journalist and editor with over 8 years in media. She focuses on culture, arts, and social issues, skilled in feature writing and critical reviews.