ETFs
The Best Growth ETF to Invest $1,000 In Right Now
This large-cap exchange-traded fund can be a great option for investors hoping to beat the market with reduced risk.
The beauty of exchange-traded funds (ETFs) is that they allow you to check multiple investment boxes at once. Whether you want to broaden your focus, focus on a specific geography, hone in on a particular sector, or target a specific investment style, there’s likely an ETF that’s right for you.
One of the drawbacks of broad-based ETFs is that they cannot offer the rapid growth returns that can sometimes come from positions in individual companies. However, this does not mean that ETFs cannot produce market-beating returns, especially those with a wide range of positions. growth target.
If you have $1,000 to invest now and want to add growth stock exposure to your portfolio, Vanguard Growth ETFs (VUG -0.82%) is a great option that has stood the test of time.
Operate in the right balance between risk and reward
Investing is generally a trade-off between risk and reward. The riskier an investment, the higher the return investors expect when things go well. The safer an investment, the more limited its upside potential may be.
Growth stocks typically fall into the first category. The potential for higher returns usually comes with higher volatility and risk. That being said, the Vanguard Growth ETF strikes the right balance between risk and reward.
Because it is growth-oriented, the ETF is built to be able to beat the market (as represented by the S&P500). At the same time, it holds about 200 large- and mega-cap stocks, providing investors with diversification across a broad range of high-quality companies. The impacts of poor performance by a single company—or even the poor performance of many companies—are mitigated by the results of the portfolio’s winners.
A story of outperformance compared to the market
Arguably, the main appeal of investing in growth stocks is the ability to beat the market, and that’s exactly what the Vanguard Growth ETF has done since its inception in January 2004. Over the years since, it’s returned about 820%, compared to 600% for the S&P 500. If someone had invested $1,000 in the fund at inception and held on, their position would be worth about $9,200 today.
The differences in returns between the fund and the S&P 500 have become more pronounced in recent years as the growth rates of mega-cap technology companies (those with market capitalizations (by more than 200 billion dollars) have accelerated considerably.
Data by YCharts.
There’s no guarantee how the ETF will perform from here on out, but its track record highlights its potential to generate strong returns over the long term.
The ETF has an extremely low expense ratio of 0.04% (or $0.40 annual fee per $1,000 invested in the fund), allowing investors to keep almost all of their gains. This is a much lower fee option than other popular growth-oriented ETFs, such as Cathie Wood ARK Innovation Exchange Traded Fundwhose expense ratio is 0.75%.
Led by the actions of the “Magnificent Seven”
THE “Magnificent Seven“Stocks have a huge influence on the Vanguard Growth ETF, and you can see their share of the fund’s holdings below:
- Microsoft (12.60%)
- Apple (11.51%)
- Nvidia (10.61%)
- Alphabet (7.54%)
- Amazon (6.72%)
- Meta-platforms (4.21%)
- You’re here (1.98%)
Although these companies have earned their title due to their economic importance and dominance of their respective industries, the fact that they represent more than 55% of the portfolio means that the ETF may not be as diversified as some investors want it.
However, if your desire is to find a growth fund, it’s hard to argue against a strategy that lets these companies lead the way. For perspective, Alphabet has been the worst performer of the group over the past decade, and it has consistently averaged annualized returns of over 20% during that time.
They still have a lot of opportunities. Sectors such as cloud computing, artificial intelligenceand electric vehicles are set to become high-growth industries for the foreseeable future, and these companies are leading the way in these areas.
The ETF is the same as the Magnificent Seven, but it includes holdings in all the major non-tech sectors:
- Basic materials: 1.3%
- Discretionary consumption: 18.3%
- Basic consumption: 0.6%
- Energy: 1%
- Financial datas: 2.4%
- Health care: 7.5%
- Industrialists: 8.3%
- Real estate: 1.4%
- Technology: 58.2%
- Telecommunications: 0.8%
- Utilities: 0.2%
Its concentration in tech stocks means you probably don’t want the Vanguard Growth ETF to be the foundation of your portfolio, especially if you already own shares of Magnificent Seven companies. But it’s still a great option for investors looking for balanced growth exposure.
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. 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. Stefon Walters holds positions at Apple and Microsoft. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Tesla, and Vanguard Index Funds-Vanguard Growth ETFs. 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.