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

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The Vanguard Growth ETF (VUG - Free Report) 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 $114.46 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

Companies that find themselves in the large cap category typically 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. Also, growth stocks are a type of equity that carries more risk compared to others. 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

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 0.53%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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 44.90% of the portfolio. Consumer Discretionary and Telecom round out the top three.

Looking at individual holdings, Apple Inc (AAPL - Free Report) accounts for about 12.96% of total assets, followed by Microsoft Corp (MSFT - Free Report) and Amazon.com Inc (AMZN - Free Report) .

The top 10 holdings account for about 44.11% 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 added roughly 8.88% so far this year and is up about 46.59% in the last one year (as of 02/28/2024). In the past 52-week period, it has traded between $226.75 and $339.44.

The ETF has a beta of 1.11 and standard deviation of 23.18% for the trailing three-year period, making it a medium risk choice in the space. With about 220 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 - Free Report) and the Invesco QQQ (QQQ - Free Report) track a similar index. While iShares Russell 1000 Growth ETF has $87.67 billion in assets, Invesco QQQ has $249.85 billion. IWF has an expense ratio of 0.19% and QQQ charges 0.20%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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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