Back to top

Image: Bigstock

Should Vanguard Mega Cap ETF (MGC) Be on Your Investing Radar?

Read MoreHide Full Article

Launched on 12/17/2007, the Vanguard Mega Cap ETF (MGC - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Blend segment of the US equity market.

The fund is sponsored by Vanguard. It has amassed assets over $6 billion, making it one of the largest ETFs attempting to match the Large Cap Blend segment of the US equity market.

Why Large Cap Blend

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.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.07%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.21%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, 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 35.20% of the portfolio. Financials and Healthcare round out the top three.

Looking at individual holdings, Apple Inc (AAPL - Free Report) accounts for about 8.33% of total assets, followed by Microsoft Corp (MSFT - Free Report) and Nvidia Corp (NVDA - Free Report) .

The top 10 holdings account for about 39.12% of total assets under management.

Performance and Risk

MGC seeks to match the performance of the CRSP US Mega Cap Index before fees and expenses. The CRSP U.S. Mega Cap Index includes the largest U.S. companies, with a target of including the top 70% of investable market capitalization. The index includes securities traded on NYSE, NYSE Market, NASDAQ or ARCA.

The ETF has gained about 20.02% so far this year and is up about 31.09% in the last one year (as of 08/27/2024). In the past 52-week period, it has traded between $146.46 and $204.52.

The ETF has a beta of 1 and standard deviation of 17.77% for the trailing three-year period, making it a medium risk choice in the space. With about 199 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Mega Cap ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, MGC is a reasonable option for those seeking exposure to the Style Box - Large Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Core S&P 500 ETF (IVV - Free Report) and the SPDR S&P 500 ETF (SPY - Free Report) track a similar index. While iShares Core S&P 500 ETF has $517.68 billion in assets, SPDR S&P 500 ETF has $563.30 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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.

Published in