ETFs
Best Large Cap ETFs in June 2024
Large-cap stocks are one of the most popular ways to invest in the market. These companies have the deepest pockets and their businesses are more resilient than a typical small cap. Large caps are therefore a great way to invest, with the flagship Standard & Poor’s 500 index generating average annual returns of around 10% over time. If you don’t want to have to invest in individual stocks, you can gain exposure to large-cap stocks via an ETF.
What is a large cap ETF?
A large-cap ETF is a exchange traded fund which invests in the largest companies in the market, those whose total value of all shares exceeds $20 billion. Large-cap ETFs are a great way to own some of the world’s most successful companies without having to do the work of analyzing individual companies and picking winners.
Large caps range from some little-known selections to well-known names that everyone knows, such as Amazon, Apple and Microsoft. So the largest large-cap companies can be worth up to 100 times more than the smallest. Large-cap ETFs are typically concentrated in larger companies, with smaller companies allocated much smaller stakes.
Large-cap companies tend to be popular with investors for several reasons:
- The best companies in the world: Large-cap companies are among the best businesses in the world and have some of the world’s greatest competitive advantages.
- Significant financial resources: Thanks to their strong business, large caps generally have access to their own cash flow and can often raise funds on favorable terms.
- Cash cows: Unlike small caps, large caps tend to grow less quickly, but they tend to be cash cows, often returning a large portion of their profits to shareholders through dividends.
- Less volatility: Sure, stocks tend to fluctuate a lot, but large caps tend to be less volatile than their small-cap cousins, making them a little better for risk-averse investors.
One of the most well-known large cap collections is the Standard & Poor’s 500 Index, which includes about 500 of America’s largest companies. The S&P 500 is a key index because it brings together the most successful U.S. publicly traded companies.
These are great benefits for investors, but if you have little investing knowledge or simply don’t want to manage your own investments, a good place to start is to buy a large-cap ETF.
Best Performing Large Cap ETFs
Bankrate selected these top funds based on the following criteria:
- U.S. funds that appear in ETF.com’s large-cap filter
- Funds among the best performing over the last five years
- Performance measured as of May 31, 2024 using the most recent figures
- No inverse or leveraged ETFs
Invesco QQQ Trust (QQQ)
This ETF tracks the Nasdaq-100 Index, a collection of the 100 largest non-financial companies traded on the Nasdaq.
- Performance since the start of 2024: 11.6 percent
- Historical performance (annual over 5 years): 21.8 percent
- Expense rate: 0.20 percent
iShares Russell Top 200 Growth ETF (IWY)
This fund tracks the Russell Top 200 Growth Index, which includes the largest U.S. companies expected to experience above-trend growth.
- Performance since the start of 2024: 15.8 percent
- Historical performance (annual over 5 years): 21.0 percent
- Expense rate: 0.20 percent
Schwab US Large Cap Growth ETF (SCHG)
This ETF tracks the Dow Jones US Large-Cap Growth Total Stock Index, which includes large, growing US companies.
- Performance since the start of 2024: 15.9 percent
- Historical performance (annual over 5 years): 20.3 percent
- Expense rate: 0.04 percent
Vanguard Mega Cap Growth ETF (MGK)
This fund tracks the CRSP US Mega Cap Growth Index, which includes the largest growth companies in the United States.
- Performance since the start of 2024: 14.6 percent
- Historical performance (annual over 5 years): 20.1 percent
- Expense rate: 0.07 percent
Nuveen ESG Large Cap Growth ETF (NULG)
This ETF invests in large-cap growth stocks that meet certain ESG (environmental, social and governance) criteria and tracks the TIAA ESG USA Large-Cap Growth Index.
- Performance since the start of 2024: 10.9 percent
- Historical performance (annual over 5 years): 19.5 percent
- Expense rate: 0.26 percent
Vanguard Russell 1000 Growth ETF (VONG)
This ETF invests in stocks from the Russell 1000 Growth Index, a broadly diversified group of large U.S. growth companies.
- Performance since the start of 2024: 14.3 percent
- Historical performance (annual over 5 years): 19.4 percent
- Expense rate: 0.08 percent
iShares Russell 1000 Growth ETF (IWF)
This index ETF tracks the Russell 1000 Growth Index, which includes large- and mid-cap U.S. growth stocks that have higher valuations, higher mid-term expected growth, and higher historical sales growth, compared to the rest of the Russell 1000.
- Performance since the start of 2024: 14.3 percent
- Historical performance (annual over 5 years): 19.2 percent
- Expense rate: 0.19 percent
Are large cap ETFs a good investment?
Large-cap ETFs are a good place for beginners, but they can also be a great option for advanced investors. With a large-cap ETF, you can earn attractive returns over the long term.
Even though a portfolio of large-cap stocks like the S&P 500 generated returns of around 10 percent per year over long periods, returns are much more erratic than that. A good year for the market would be a 30 percent return, but sometimes the market can also drop that much in a year. So if you want to get the level of returns offered by large caps, it is vital to buy and hold.
As noted above, large-cap companies are made up of the largest and most financially stable companies in the market. This status tends to make them fluctuate a little less than small-cap stocks, even the best small caps. But during lean years, this may seem like little comfort, as they can still decline significantly. Another advantage: large caps tend to pay more dividends than their smaller rivals.
If you’re looking for growth and stability, you can split the difference between large and small caps by focusing on best mid cap ETFs.
Conclusion
Large-cap ETFs can be a great way to invest in the stock market, regardless of your skill level, and they can help investors buy into this segment of the market without having to do so. in-depth research into their investment. But like any type of investment, they are not without risks, although those risks tend to be lower than other types of stocks, like small and mid-cap stocks.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Furthermore, investors are advised that past performance of investment products is not a guarantee of future price appreciation.