Should Vanguard Growth ETF (VUG) Be on Your Investing Radar?

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The Vanguard Growth ETF (VUG) was launched on 01/26/2004, and is a passively managed exchange traded fund designed to offer broad exposure to the Large Cap Growth segment of the US equity market.

The fund is sponsored by Vanguard. It has amassed assets over $86.56 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 typically have a market capitalization above $10 billion. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.

Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Also, growth stocks are a type of equity that carries more risk compared to others. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.

Costs

When considering an ETF’s total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.04%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.50%.

Sector Exposure and Top Holdings

It is important to delve into an ETF’s holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, 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 46.10% of the portfolio. Consumer Discretionary and Telecom round out the top three.

Looking at individual holdings, Apple Inc. (AAPL) accounts for about 10.35% of total assets, followed by Microsoft Corp. (MSFT) and Amazon.com Inc. (AMZN).

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 -4.60% so far this year and is up roughly 23.28% in the last one year (as of 01/06/2022). In the past 52-week period, it has traded between $243.15 and $325.67.

The ETF has a beta of 1.03 and standard deviation of 24.03% for the trailing three-year period, making it a medium risk choice in the space. With about 289 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 $76.30 billion in assets, Invesco QQQ has $208.82 billion. IWF has an expense ratio of 0.19% and QQQ charges 0.20%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds 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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Vanguard Growth ETF (VUG): ETF Research Reports
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Invesco QQQ (QQQ): ETF Research Reports
 
iShares Russell 1000 Growth ETF (IWF): ETF Research Reports
 
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