ETFs
1 Simple Growth ETF to Buy Now for Under $1,000
Maximize your gains while reducing your risks.
Investing through an exchange-traded fund (ETF) offers investors an incredible number of choices. Just like stocks, some ETFs are more volatile and others less so, some more growth oriented and others more value oriented. The list goes on.
Yet what is similar about all of them is that they offer predefined diversification. Even if you invest in an ETF with few stocks and focused on a specific trend, you are spreading your eggs into different baskets. Take Cathie Wood’s ETFs, for example. His flagship Arche Innovation ETF only owns 36 shares. Or you can invest in Vanguard Russell 3000 ETF, which, as you may have already guessed, invests in all 3,000 stocks in this index. The advantage of the former lies in the concentration of investments in disruptive technologies, while that of the latter is low-risk diversification.
If you’re looking for a high-growth option that leans toward growth stocks but minimizes risk, the Vanguard Growth ETF (VUG 0.19%) is an obvious option.
Why this ETF?
It’s not easy to beat the market. An ETF that tracks the S&P500, a commonly used measure of “the market”, has typically provided an annualized return of around 10% over the long term. This doesn’t mean the S&P 500 gains 10% every year – it doesn’t. He goes through better and worse years, great and terrible years.
However, if you plug in your investment and then “set it and forget it,” you’ll end up earning about 10% over the long term, on average. This is a great rate to grow your money, especially when you take into account its annual compounding. Most investors benefit from investing part of their portfolio in this type of index fund, which includes approximately 500 of the largest public companies in the United States.
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However, it is possible to beat the market. The Vanguard Growth ETF takes the idea of indexing up one notch and invests in approximately 200 of the largest U.S. companies, reflecting the composition of the CRSP US Large Cap Growth Index. This takes the cream of the crop and gives you exposure to the biggest growing companies.
And it’s always very diverse. He focuses on growth stocks, but he owns enough stocks to maintain a large collection – everything from the drugmaker Elie Lily to the payment service provider Visa.
The ETF’s top five holdings are Microsoft, Apple, Nvidia, AmazonAnd Metaplatforms. Since it is a weighted index, these stocks represent approximately 50% of the total value of the ETF. But the remaining 50% is distributed among many other titles. And because it’s a passively managed ETF, meaning it simply tracks an index, it will automatically sell underperforming stocks when the index does and keep your ETF in growth mode.
Finally, the fund has an extremely low expense ratio of 0.04%, making it inexpensive to own.
Outperform the market
For the most part, actively managed funds don’t beat the market in any given year. Last year, 60% of them underperformed market gains. But the Vanguard Growth fund has handily beaten the market, on average, over its lifetime, leading to higher annualized gains of 11.86% over the past 20 years, compared to 10.34% for the entire fund. walk.
These small percentage points translate into a substantial gap between the amount you would have earned if you had invested $1,000 in it versus a standard S&P 500 ETF two years ago.
VUG Total Yield Level data by Y Charts
For most investors, it still makes sense to invest in a broader market index fund. This provides an unbeatable level of security. But if you’re looking for additional investments, the Vanguard Growth ETF is a fantastic and simple ETF to buy and hold forever.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Vanguard Index Funds-Vanguard Growth ETF, Vanguard S&P 500 ETF, and Visa. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.