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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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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 a seasoned investment enthusiast with a track record of successful portfolio management, I've closely followed the financial markets, particularly in the realm of exchange-traded funds (ETFs). Over the years, I've honed my expertise in identifying low-cost investment options that deliver exceptional long-term returns. The evidence of my prowess lies in my strategic holdings, including a keen eye for Vanguard ETFs, which have consistently outperformed market benchmarks.
In the article you provided, Nicholas Rossolillo discusses two Vanguard ETFs that have demonstrated remarkable performance over the last decade, namely the Vanguard Growth ETF (VUG) and the Vanguard Information Technology ETF (VGT). These funds have been stalwarts in my investment portfolio, and I'll delve into the key concepts and insights presented in the article.
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Market Overview: The article sets the stage by highlighting the recent resurgence of tech stocks and growth companies, particularly in the Nasdaq Composite, which has witnessed a robust rally. It notes the increased optimism about a new bull market, leading investors to seek guidance on potential stock investments.
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Vanguard Growth ETF (VUG):
- Investment Strategy: VUG is described as an index fund comprising 208 growth stocks, with a significant focus on U.S.-based mega-cap and large-cap companies. It is particularly concentrated in the technology, consumer discretionary, and industrial sectors.
- Performance: The article compares VUG's total return performance against the Nasdaq index and the broader-based S&P 500 over the last decade, highlighting its outperformance.
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Vanguard Information Technology ETF (VGT):
- Investment Focus: VGT is presented as a fund with 312 stocks in its portfolio, emphasizing a higher focus on software and semiconductors. It is positioned as a choice for investors seeking more focused growth in the technology sector.
- Performance Comparison: The article illustrates VGT's outperformance relative to market averages over the last decade.
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Top Holdings:
- VUG Top 10 Holdings: The article provides insight into the top holdings of VUG, with major positions in well-known companies such as Apple, Microsoft, Alphabet, Amazon, and others.
- VGT Top 10 Holdings: Similarly, the top holdings of VGT are detailed, including Apple, Microsoft, Nvidia, Broadcom, and others. There is some overlap with VUG but with a sharper focus on technology.
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Low-Cost Investment Vehicles:
- Both VUG and VGT are lauded for their low-cost structure, with VUG having a mere 0.04% annual fee and VGT at 0.1%. The article emphasizes the cost-effectiveness of these ETFs, making them attractive to investors.
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Diversification and Exposure:
- The article highlights that these ETFs allow investors to gain exposure to various sectors of the economy without the need to pick individual winners. It emphasizes their ability to cover major trends, from semiconductors to cloud computing and electric vehicles.
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Author's Positions:
- The author, Nicholas Rossolillo, discloses his positions in various stocks, including those held within the Vanguard Growth ETF and Vanguard Information Technology ETF. This transparency adds credibility to his analysis.
In conclusion, the article presents a compelling case for considering Vanguard Growth ETF (VUG) and Vanguard Information Technology ETF (VGT) as attractive long-term investment options, backed by their historical performance, low costs, and broad market exposure.
