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

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Designed to provide broad exposure to the Large Cap Growth segment of the US equity market, the Vanguard Growth ETF (VUG) is a passively managed exchange traded fund launched on 01/26/2004.

The fund is sponsored by Vanguard. It has amassed assets over $68.61 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.

Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. Compared to value stocks, growth stocks are a safer bet in a strong bull market, but don’t perform as strongly in almost all other financial environments.

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 0.04%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.62%.

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.

Looking at individual holdings, Apple Inc. (AAPL) accounts for about 12.71% of total assets, followed by Microsoft Corp. (MSFT) and Amazon.com Inc. (AMZN).

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 lost about -26.69% so far this year and is down about -10.31% in the last one year (as of 05/11/2022). In the past 52-week period, it has traded between $234.59 and $325.67.

The ETF has a beta of 1.09 and standard deviation of 26.31% for the trailing three-year period, making it a medium risk choice in the space. With about 267 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 outstanding 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) and the Invesco QQQ (QQQ) track a similar index. While iShares Russell 1000 Growth ETF has $59.22 billion in assets, Invesco QQQ has $164.03 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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Vanguard Growth ETF (VUG): ETF Research Reports
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Invesco QQQ (QQQ): ETF Research Reports
 
iShares Russell 1000 Growth ETF (IWF): ETF Research Reports
 
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