<div id="readability-page-1"><div><div>The S&amp;P 500 (SNPINDEX: ^GSPC) has been dominated by a handful of megacap growth stocks over the last few years. Their strong performance of these select stocks has led to the benchmark index posting total returns of 26%, 25%, and 18% in 2023, 2024, and 2025, respectively. Those returns are well above average, and it's reasonable to expect a reversion to the mean going forward.But while the growth stock-led S&amp;P 500 has hit new all-time highs, many other stocks have been left in the dust. Analysts at Vanguard expect a couple of key groups of stocks to outperform over the next decade as a result. And the good news for investors is that it offers simple, inexpensive ETFs you can buy to invest in market segments poised to outperform the large-cap index.Will AI create the world's first trillionaire? 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Continue »<figure><div><div><img src="https://imageproxy.pbkrs.com/https://s.yimg.com/ny/api/res/1.2/ihKXa1W8XXW0iHwlJLZajg--/YXBwaWQ9aGlnaGxhbmRlcjt3PTk2MDtoPTcyMA--/https://media.zenfs.com/en/motleyfool.com/7a786653dada9aaba17462b0f58c4ec2?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="960" height="720" original-src="https://imageproxy.pbkrs.com/https://s.yimg.com/ny/api/res/1.2/ihKXa1W8XXW0iHwlJLZajg--/YXBwaWQ9aGlnaGxhbmRlcjt3PTk2MDtoPTcyMA--/https://media.zenfs.com/en/motleyfool.com/7a786653dada9aaba17462b0f58c4ec2"/></div></div><figcaption>Image source: Getty Images.</figcaption></figure><h2>The two market segments set to beat the S&amp;P 500 over the next 10 years</h2>Vanguard analysts provide quarterly updates for investors on its Capital Markets Model forecasts. The model uses valuations to project long-term prospects for equities, bonds, and other asset classes as well as inflation.Vanguard notes that valuations tend to be poor predictors of short-term returns but can be useful for longer-term predictions. As such, it doesn't recommend using these predictions as the primary reason for changing portfolio allocations. That said, long-term outlooks can offer ideas for investors thinking about the markets going forward.The most recent update from Vanguard's model shows two segments of the market outperforming over the long run: small-cap stocks and value stocks. The analysts see small-cap stocks producing annualized returns of 6.2% and value stocks producing 6.8% average returns. That compares to expected returns of 4.9% for U.S. equities overall and 4.8% for large-cap stocks in particular.With valuations as the core basis for Vanguard's model, it's easy to see why it expects small-cap and value stocks to outperform. At the start of 2026, the valuation spread between growth stocks and value stocks is at its widest since the peak of the dot-com bubble. The trailing P/E for the Russell 1000 Growth index was 39.32 compared to just 22.12 for the Russell 1000 Value index.Likewise, the valuation gap between the large-cap S&amp;P 500 and the small-cap S&amp;P 600 is also notable. The S&amp;P 500 traded for a forward P/E of 24 at the end of 2025 compared to a 16-times earnings ratio for the S&amp;P 600. That's despite similar earnings growth outlooks.Overall, the long-term prospects for both value and small-cap stocks look promising based on valuation. Here are the two Vanguard funds you can use to take advantage.<h2>Two Vanguard ETFs to buy</h2>For investors looking to tilt their portfolios toward small-cap and value stocks, Vanguard offers two simple and inexpensive ETFs to do just that.The Vanguard Small-Cap ETF (NYSEMKT: VB) tracks the performance of the CRSP U.S. Small Cap Index. It's highly diversified with over 1,300 stocks in the portfolio. Since it uses standard market-cap weighting, it lets stocks that appreciate in value take up a larger portion of the portfolio. It also reduces turnover, which can be a challenge for many small-cap index funds. With an expense ratio of just 0.03%, it's one of the best-in-class options for small-cap index funds.The Vanguard Value ETF (NYSEMKT: VTV) tracks the performance of the CRSP U.S. Large Cap Value Index, which includes the less expensive half of the broader market. It includes over 300 stocks, but it maintains a high level of diversification, as the largest holding accounts for just over 3% of the entire portfolio.While the fund's filter is based on simple valuation metrics, leaving it susceptible to value traps, market-cap weighting can mitigate that risk. It also keeps turnover low and costs down. The value ETF is inexpensive, sporting an expense ratio of just 0.03%.Both ETFs have gotten off to a strong start in 2026. The value fund is up 4%, and the small-cap fund is up 3% compared to a decline of 1% in the S&amp;P 500 year to date, as of this writing. But there's still a lot of room for both to keep outperforming over the next decade. Either could be a great addition to a portfolio right now, adding some diversification.<h2>Should you buy stock in Vanguard Value ETF right now?</h2>Before you buy stock in Vanguard Value ETF, consider this:The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard Value ETF wasn’t one of them. 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The Motley Fool has a disclosure policy.2 Vanguard Index Funds to Beat the S&amp;P 500 Over the Next 10 Years, According to Analysts was originally published by The Motley Fool</div></div></div>

Analysts at Vanguard predict that small-cap and value stocks will outperform the S&P 500 over the next decade, with expected annualized returns of 6.2% and 6.8%, respectively. This contrasts with expected returns of 4.9% for U.S. equities overall. Vanguard recommends two ETFs for investors: the Vanguard Small-Cap ETF (VB) and the Vanguard Value ETF (VTV), both with low expense ratios of 0.03%. Both funds have performed well in 2026, with the value fund up 4% and the small-cap fund up 3%, while the S&P 500 has declined by 1% year to date.