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

Style Box ETF report for VUG

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This story originally appeared on Zacks

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.

- Zacks

The fund is sponsored by Vanguard. It has amassed assets over $88.25 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 fall in the large cap category tend to have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.

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. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other 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 0.49%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many 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) accounts for about 10.35% 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 added about 26.32% so far this year and is up roughly 43.06% in the last one year (as of 11/02/2021). In the past 52-week period, it has traded between $225.55 and $314.30.

The ETF has a beta of 1.03 and standard deviation of 24.61% for the trailing three-year period, making it a medium risk choice in the space. With about 289 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 $77.40 billion in assets, Invesco QQQ has $202.10 billion. IWF has an expense ratio of 0.19% and QQQ charges 0.20%.

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.



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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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