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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.
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NYSEMKT: VUG
Vanguard Index Funds - Vanguard Growth ETF
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$322.82
Price as of January 26, 2024, 4:00 p.m. ET
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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.
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As someone deeply immersed in the world of financial markets and investment strategies, I can confidently say that the article by Nicholas Rossolillo provides valuable insights into the realm of exchange-traded index funds (ETFs), particularly focusing on Vanguard's offerings. Now, let's break down the concepts and information presented in the article to showcase my expertise:
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Vanguard ETFs Performance:
- The article highlights two Vanguard ETFs that have demonstrated exceptional returns over the past decade: Vanguard Growth ETF (VUG) and Vanguard Information Technology ETF (VGT).
- It points out the recent resurgence in tech stocks and growth companies, citing the Nasdaq Composite's significant gains.
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Investment Strategies for Long-Term Growth:
- The author suggests that investors seeking long-term growth potential can consider low-cost investment options, specifically the mentioned Vanguard ETFs.
- Emphasis is placed on the idea that these ETFs can be suitable for individuals uncertain about where to start in the stock market.
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Top Holdings and Portfolio Composition:
- Vanguard Growth ETF (VUG) is detailed as having a portfolio of 208 growth stocks, with a strong focus on U.S.-based mega-cap and large-cap companies in technology, consumer discretionary, and industrial sectors.
- The top holdings of VUG are listed, showcasing major companies like Apple, Microsoft, Alphabet, Amazon, Nvidia, and others.
- Vanguard Information Technology ETF (VGT) is mentioned as having 312 stocks in its portfolio, with a higher concentration on software and semiconductors.
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Performance Comparison:
- The article provides visual representations of the performance of the mentioned ETFs compared to broader market indices like the Nasdaq and S&P 500 over the last decade.
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Low-Cost Investment Options:
- The author underscores the cost-effectiveness of these Vanguard ETFs, with the Vanguard Growth ETF having a 0.04% annual fee and the Vanguard Information Technology ETF having a 0.1% annual fee.
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Investment Diversity and Trends:
- Both ETFs are positioned as a close-to-no-fee investment allowing investors to participate in various secular growth trends, such as semiconductors, cloud computing, electric vehicles, and e-commerce.
- The article suggests that investors can gain exposure to top-performing stocks without the need to pick individual winners.
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Motley Fool's Perspective:
- The Motley Fool's board members and their affiliations with companies like Facebook, Meta Platforms, and Alphabet are disclosed in the article, adding a layer of transparency.
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Author's Personal Positions:
- Nicholas Rossolillo discloses his personal positions in various stocks and Vanguard ETFs, providing transparency about potential conflicts of interest.
In conclusion, this article provides a comprehensive overview of two Vanguard ETFs, offering a balanced mix of historical performance, top holdings, and cost-effectiveness, making it a valuable resource for investors seeking insights into long-term growth opportunities.
