This Vanguard ETF Is a Great S&P 500 Complement

Key Morningstar Metrics for Vanguard Extended Market ETF

• Morningstar Medalist Rating: Silver
• Process Pillar Rating: Above Average
• People Pillar Rating: Above Average
• Parent Pillar Rating: High

Vanguard Extended Market ETF VXF tracks a total market index that excludes S&P 500 stocks. It’s a misfit in the mid-cap blend category, but it pairs well with a fund that tracks the S&P 500 index to replicate the entire US stock market.

The exchange-traded fund replicates the S&P Completion Index, which removes all the S&P 500 stocks from the S&P Total Market Index and weights the remaining portfolio by market cap. The parent index holds all US stocks that pass its minimum requirements, ensuring they can be traded efficiently.

The S&P 500 requires companies to have positive GAAP earnings over the most recent quarter and the past four quarters combined. By excluding stocks that don’t meet its profitability screen, it avoids large unprofitable stocks. These unprofitable companies land in this fund, which gives them more weight than the smaller, profitable firms that fall outside the S&P 500’s size threshold. As a result, the portfolio tilts away from quality, making it riskier since stocks with low-quality earnings tend to fluctuate more and underperform those with high-quality earnings.

The portfolio diversifies well, mitigating risks from its low-quality bent. It stows 10% in its top 10 holdings, or 5% less than peers in the mid-blend Morningstar Category as of July 2025. It also holds nearly 10 times as many stocks. It holds smaller companies than the average mid-blend fund, since its net scrapes the bottom of the tradable US stock market. Overall, smaller stocks have outperformed in the long run, but they’re more volatile, and there’s no guarantee they’ll outperform in the future.

The ETF share class outperformed its average peer by 1.27 percentage points annualized over the 10 years through August 2025. The fund’s performance swung wildly compared with peers over the past five years. Heavy stakes in technology in 2021 and 2022 pulled the fund’s performance lower than peers. Technology stocks have been a tailwind recently, though. They’ve helped the fund rebound over the three years through August 2025.

Vanguard Extended Market ETF: Performance Highlights

The fund has had some unruly performance in recent years. The ETF outpaced the mid-blend category by 1.49 percentage points annualized from its inception in 2001 through August 2025. The fund clocked higher volatility than its peers due to its small-cap and low-quality tilts.

The fund’s largest holdings are stocks that would qualify for the S&P 500 based on size alone, but they didn’t make the cut due to a lack of profitability or committee decision. Those holdings tend to have higher volatility and can take the portfolio’s performance on wild rides. For instance, the fund held Tesla until it graduated to the S&P 500 in December 2020. Tesla skyrocketed when it was in the portfolio and helped it outperform peers by 20 percentage points in 2020.

Tesla blew air into the fund’s sails, but other large stocks acted as a headwind. The ETF underperformed peers by 11 and 12 percentage points in 2021 and 2022, respectively. Large tech holdings such as Uber UBER and Block XYZ—formerly Square—were culprits, since they landed in the top five holdings and got crushed.

If investors pair this fund with an S&P 500 index fund, the fund’s intended use, volatility, and performance should resemble a total market fund. However, as a stand-alone fund, it can take wild swings and exhibit higher volatility than its peers.