If you're interested in broad exposure to the Large Cap Growth segment of the US equity market, look no further than the Vanguard Growth ETF (VUG), a passively managed exchange traded fund launched on 01/26/2004.
The fund is sponsored by Vanguard. It has amassed assets over $153.57 billion, making it one of the largest ETFs attempting to match the Large Cap Growth segment of the US equity market.
Why Large Cap Growth
Large cap companies usually have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Additionally, growth stocks have a greater level of risk associated with them. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.04%, making it the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.47%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector--about 46.80% of the portfolio. Consumer Discretionary and Telecom round out the top three.
Looking at individual holdings, Apple Inc (AAPL) accounts for about 11.52% of total assets, followed by Nvidia Corp (NVDA) and Microsoft Corp (MSFT).
The top 10 holdings account for about 56.78% of total assets under management.
Performance and Risk
VUG seeks to match the performance of the CRSP U.S. Large Cap Growth Index before fees and expenses. The CRSP US Large Cap Growth Index represents the growth companies of the CRSP US Large Cap Index.
The ETF has lost about -1.20% so far this year and is up roughly 30.27% in the last one year (as of 01/14/2025). In the past 52-week period, it has traded between $310.98 and $428.11.
The ETF has a beta of 1.12 and standard deviation of 23.15% for the trailing three-year period, making it a medium risk choice in the space. With about 183 holdings, it effectively diversifies company-specific risk.
Alternatives
Vanguard Growth ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VUG is an excellent option for investors seeking exposure to the Style Box - Large Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell 1000 Growth ETF (IWF) and the Invesco QQQ (QQQ) track a similar index. While iShares Russell 1000 Growth ETF has $104.40 billion in assets, Invesco QQQ has $313.80 billion. IWF has an expense ratio of 0.19% and QQQ charges 0.20%.
Bottom-Line
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Get it free >>Vanguard Growth ETF (VUG): ETF Research Reports
Apple Inc. (AAPL) : Free Stock Analysis Report
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NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Invesco QQQ (QQQ): ETF Research Reports
iShares Russell 1000 Growth ETF (IWF): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
