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Got $1,000 to Invest in Stocks? Put It in This ETF.

There are many misconceptions about the stock market and investing. One of them is how complex it has to be. People assume you need experience in finance or to spend hours researching companies, and that’s not the case. You can do all that and it has its benefits, but It is not a requirement to make a lot of money in the stock market.

A simpler approach is to invest in an exchange-traded fund (ETF), which gives you exposure to many companies at once, and trust them as a collective. If you already have an emergency fund saved and a plan to tackle any high-interest debt you may have, there is one fund I would invest $1,000 in without a second thought, and that’s the Vanguard Growth ETF (VUG 1.30%).

Vanguard Growth ETF is a two-for-one special

People often think of growth stocks as smaller or younger companies because they are considered to have more room to grow. However, that label is not reserved for companies of a certain size. The Vanguard Growth ETF exemplifies this reality. Its holdings include only large-cap growth stocks (companies with market limits of at least 10 billion dollars).

Small- and mid-cap growth stocks are great because they have hypergrowth potential, but their smaller size also makes them more sensitive to economic conditions and volatility. Large-cap growth stocks can be the best of both worlds. You get high-growth opportunities, but larger companies are generally more stable because of their established businesses and resources.

The average market capitalization of the companies in the Vanguard Growth ETF is around $790 billion, so it is led by many market leaders and industry staples.

The fund’s top holdings are well-known names

Most large-cap growth stocks are technology companies, and the ETF’s holdings reflect that concentration. The technology sector represents approximately 55% of the fund and the remainder is broken down as follows (as of December 31, 2023):

  • Basic materials: 1.4%
  • Consumer Discretionary: 20.4%
  • Basic consumer products: 0.7%
  • Energy: 1.3%
  • Finance: 2.6%
  • Health care: 7.1%
  • Industrial actions: 8.8%
  • Real estate: 1.8%
  • Telecommunications: 0.9%
  • Utilities: 0.2%

Digging deeper, we see that Vanguard Growth’s top five holdings are Apple, microsoft, Amazon, Nvidiaand Alphabet — five of the six most valuable public companies in the world. Together, they represent about 44% of the ETF’s portfolio value.

Typically, you’ll want your ETF to be a little more diversified, but having five of the world’s most successful and promising companies as a fund’s leading holdings is nothing to frown upon. Amazon stock has been the worst performer of the group over the past five years and is still up 85%.

AAPL data by YCharts.

Vanguard Growth has outperformed the market

Investors should want their ETFs to have the potential to outperform the market. Otherwise, you’re probably better off sticking with a S&P 500 ETF and collect the average return of the market (which is not a bad option).

Over the past decade, the Vanguard Growth ETF is up 257% compared to the S&P 500’s 175% gain. That’s about a 13.5% annualized return, which is pretty good for a 200+ ETF. Actions. Assuming that pace continues, this is roughly how much a $500 monthly investment could grow to over time.

Years of investment Final value of the portfolio
10 $113,200
fifteen $252,500
twenty $514,900
25 1.01 million dollars
30 1.94 million dollars

Calculations by author. Portfolio values ​​rounded to the nearest hundred.

We can’t know how the ETF will perform in the future, but past results give some indication of what might be possible. It also helps that the handful of companies leading the way for the ETF generally have high growth potential. Between artificial intelligence, cloud computing and other technological innovations, the fund’s “Magnificent Seven” stocks could continue to fuel its growth.

Investing $1,000 in the Vanguard Growth ETF today is a move you can count on and that will likely pay off in the future.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Alphabet executive Suzanne Frey is a member of The Motley Fool’s board of directors. Stefon Walters holds positions at Apple and Microsoft. The Motley Fool holds and recommends Alphabet, Amazon, Apple, Microsoft, Nvidia, and Vanguard Index Funds-Vanguard Growth ETF. The Motley Fool has a disclosure policy.

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