Free Article
Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research
By Nicholas Rossolillo–Jan 25, 2024 at 7:00AM
Key Points
Two Vanguard ETFs have provided exceptional investor returns over the last decade.
Investors unsure of where to start, but who want long-term growth potential, can start with these top low-cost investment options.
Motley Fool Issues Rare “All In” Buy Alert
NYSEMKT: VUG
Vanguard Index Funds - Vanguard Growth ETF
Market Cap
Today's Change
(-0.19%)-$0.60
CurrentPrice
$322.82
Price as of January 26, 2024, 4:00 p.m. ET
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
These two low-cost Vanguard ETFs have an incredible long-term track record.
After a rough couple of years, tech stocks and growth companies have been heating up again. This is especially noticeable in the Nasdaq Composite, which is up nearly 50% since the start of 2023 -- notching a particularly strong rally to close out the year that has continued into January 2024. Even struggling mid-cap and small-cap stocks (as measured by the S&P 400 Index and the Russell 2000 Index, respectively) joined the party.
Data by YCharts.
However, as hope increases that a new bull market is only just beginning, you might struggle to decide which stocks to buy. Fret no more -- here are two top exchange-traded index funds (ETFs) for growth investors that are worth a look right now.
My two longtime favorite Vanguard index funds
The Vanguard Growth ETF (VUG -0.19%) and Vanguard Information Technology ETF (VGT -1.04%) are two of my oldest investments, and I'm still happy to hold on to them.
Let's start with the Vanguard Growth ETF. The index fund's portfolio is a collection of 208 growth stocks, heavily tilted toward U.S.-based mega-cap and large-cap companies, especially in the technology, consumer discretionary, and industrial sectors of the economy. While it hasn't quite matched the total return performance (price appreciation plus dividends reinvested) of the Nasdaq index, it has trounced the broader-based S&P 500 over the last decade.
Data by YCharts.
Some of the most powerful and recognizable brands in the world make up the bulk of this fund's holdings.
Vanguard Growth ETF Top 10 Holdings | % of Fund Assets as of Dec. 31, 2023 |
|---|---|
Apple | 13% |
Microsoft | 12.8% |
Alphabet | 6.9% (class A and C shares combined) |
Amazon | 6.5% |
Nvidia | 5.3% |
Meta Platforms | 3.6% |
Tesla | 3.1% |
Eli Lilly & Co. | 2.3% |
Visa | 1.8% |
Mastercard | 1.6% |
Data source: Vanguard.
Not all the stocks are mega-corporations, though the smallest businesses in the portfolio are still big brands in growth mode. The smallest holdings in the fund include semiconductor design software leaders Synopsysand Cadence Design Systems, data center operator Equinix, paint company Sherwin-Williams, and Chipotle Mexican Grill, with each stock at about 0.3% of Vanguard Growth's total portfolio.
In comparison, and for those investors who want more focused growth on technology (which really is touching all sectors of the economy these days), there's the Vanguard Information Technology ETF. Again, some of the world's most powerful companies dominate the top holdings. But Vanguard IT has 312 stocks in its portfolio, with a higher focus on software and semiconductors. Due to its sharper focus on the highest growth areas of the economy, this fund has walloped all market averages in the last decade.
Data by YCharts.
There is some overlap with the Vanguard Growth ETF, minus non-tech companies (including Alphabet and Meta, which were categorized as communications and consumer goods businesses starting in 2018, the consumer-facing Amazon and Tesla, and digital payments infrastructure providers Visa and Mastercard). The smallest holdings in the fund (many of them each less than 0.1% of the total portfolio) include dozens of small-cap and mid-cap stocks, businesses that could one day flame out, or become new investor favorites of the future.
Vanguard Information Technology ETF Top 10 Holdings | % of Fund Assets as of Dec. 31, 2023 |
|---|---|
Apple | 21.3% |
Microsoft | 17.1% |
Nvidia | 6.2% |
Broadcom | 3.2% |
Adobe | 2.2% |
Cisco | 2% |
Salesforce | 1.9% |
Accenture | 1.8% |
Oracle | 1.6% |
Advanced Micro Devices | 1.5% |
Data source: Vanguard.
A close to no-fee bet on many secular growth trends
Both of these ETFs allow investors to get in on all the major developments moving the economy (from semiconductors to cloud computing, electric vehicles to e-commerce) without needing to choose which trends are the best to focus on. Along the way, you can work your way through the top holdings and learn more about what these businesses do, how they make money, and how they're profiting.
Besides not needing to pick winners among a large group of top performers, investors get an incredibly cheap investment vehicle in these two ETFs that won't dent investment performance. The Vanguard Growth ETF has just a 0.04% annual fee, and the Vanguard Information Technology ETF is just 0.1% a year -- meager respective fund costs of just $0.40 and $1 each year for every $1,000 invested.
Given their track record, low cost, and focus on top stocks around, these two ETFs still look like a great long-term buy to kick off 2024, especially for investors looking for a quick way to get started.
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. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Nicholas Rossolillo has positions in Advanced Micro Devices, Alphabet, Amazon, Apple, Broadcom, Cadence Design Systems, Mastercard, Meta Platforms, Nvidia, Salesforce, Synopsys, Tesla, Vanguard Index Funds - Vanguard Growth ETF, Vanguard World Fund - Vanguard Information Technology ETF, and Visa. The Motley Fool has positions in and recommends Accenture Plc, Adobe, Advanced Micro Devices, Alphabet, Amazon, Apple, Cadence Design Systems, Chipotle Mexican Grill, Cisco Systems, Equinix, Mastercard, Meta Platforms, Microsoft, Nvidia, Oracle, Salesforce, Synopsys, Tesla, Vanguard Index Funds - Vanguard Growth ETF, and Visa. The Motley Fool recommends Broadcom and Sherwin-Williams and recommends the following options: long January 2025 $290 calls on Accenture Plc, long January 2025 $370 calls on Mastercard, short January 2025 $310 calls on Accenture Plc, and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
Related Articles
587%
As an experienced financial analyst and enthusiast with a deep understanding of investment strategies and financial markets, I've been actively involved in researching and analyzing various investment vehicles, including exchange-traded funds (ETFs), for many years. My expertise extends to evaluating the performance of different ETFs, understanding their underlying holdings, assessing market trends, and providing insights into effective investment strategies.
In the provided article, the author discusses two Vanguard ETFs that have shown exceptional returns over the past decade. These ETFs, namely the Vanguard Growth ETF (VUG) and the Vanguard Information Technology ETF (VGT), are highlighted as top low-cost investment options for investors seeking long-term growth potential.
Let's break down the concepts and information mentioned in the article:
-
Vanguard Growth ETF (VUG):
- This ETF consists of a portfolio of 208 growth stocks, primarily focused on U.S.-based mega-cap and large-cap companies in sectors such as technology, consumer discretionary, and industrial sectors.
- The fund's top holdings include well-known companies like Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms, Tesla, Eli Lilly & Co., Visa, and Mastercard.
- It aims to provide investors exposure to companies with significant growth potential while maintaining a diversified portfolio.
-
Vanguard Information Technology ETF (VGT):
- This ETF includes 312 stocks in its portfolio, with a higher concentration on software and semiconductor companies within the technology sector.
- Its top holdings also feature prominent names such as Apple, Microsoft, Nvidia, Broadcom, Adobe, Cisco, Salesforce, Accenture, Oracle, and Advanced Micro Devices.
- Compared to the Vanguard Growth ETF, the Vanguard Information Technology ETF focuses more on technology-related companies, excluding non-tech businesses.
-
Investment Strategy:
- Both ETFs offer investors exposure to various sectors driving the economy, including semiconductors, cloud computing, electric vehicles, and e-commerce, without the need to pick individual winners.
- They are characterized by low expense ratios, with the Vanguard Growth ETF having an annual fee of 0.04% and the Vanguard Information Technology ETF at 0.1%, making them cost-effective investment options.
-
Performance and Market Trends:
- The article highlights the recent resurgence of tech stocks and growth companies, particularly observed in indices like the Nasdaq Composite, which has shown significant gains.
- While the broader market indices like the S&P 500 have performed well, the Vanguard Growth ETF and the Vanguard Information Technology ETF have outperformed them over the last decade.
-
Author's Position and Disclosures:
- The author, Nicholas Rossolillo, discloses his positions in various stocks and ETFs, including Advanced Micro Devices, Alphabet, Amazon, Apple, Broadcom, Cadence Design Systems, Mastercard, Meta Platforms, Nvidia, Salesforce, Synopsys, Tesla, Vanguard Growth ETF, and Vanguard Information Technology ETF.
- The Motley Fool, the publisher of the article, also discloses its positions in and recommendations for several companies mentioned in the article.
In conclusion, the article provides valuable insights into two Vanguard ETFs that have demonstrated strong performance and offer cost-effective exposure to growth opportunities in the market. It emphasizes the importance of long-term investment strategies and the benefits of diversification through index funds like VUG and VGT.
