The tech sector rightly gets a lot of attention. It really sprang to the fore over the past two years as artificial intelligence grabbed headlines, sending chipmaker stocks like Nvidia (NASDAQ:NVDA) and Broadcom (NASDAQ:AVGO) to the stratosphere.
In just the last year alone, NVDA shares have more than tripled while AVGO stock has doubled, both handily outperforming the broader technology sector by a wide margin.
That is the sort of growth investors seek for their portfolio, but concentrating your portfolio in one sector or in just a handful of stocks introduces significant concentration risk.
Yet it’s not necessary to bet on just one sector or a few companies and hope that you can profit handily from the investment.
That’s why I like the Vanguard Growth ETF (NYSEARCA:VUG). Nvidia is a big component of the fund, but it owns 182 other stocks as well. Here’s why this ETF deserves to be on your radar.
24/7 Wall St. Insights:
- Technology has led the stock market to record highs, riding the coattails of semiconductor stocks like Nvidia (NVDA) and Broadcom (AVGO).
- Choosing a broader coalition of stocks from across numerous sectors by buying the Vanguard Growth ETF (VUG) can earn you better returns with lower risk and at low cost
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Bigger, better returns at lower risk and cost
Exchange-traded funds (ETFs) offer investors an easy means of spreading out the risk across dozens or hundreds of stocks. By choosing an asset manager like Vanguard, you can achieve the same — or better — result at low cost.
Vanguard is well-known for having some of the lowest expense ratios of any ETF available. The Growth ETF has a minuscule 0.04% expense ratio.
Equally important, while one share of NVDA will cost you about $140 per share today after the chipmaker’s 10-for-1 stock in June, even with that reduced price, putting $1,000 into the stock will still net you fewer than 10 shares.
However, taking that same $1,000 and putting it into VUG gets you ownership of Nvidia (it represents 10% of the ETF’s portfolio), but also a bushel of other companies, too. The top five holdings in Vanguard Growth ETF include Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Nvidia, Amazon (NASDAQ:AMZN), and Meta Platforms (NASDAQ:META).
You benefit not only from the growth NVDA might make, but the gains of the other companies as well.
Spreading the risk
While those names lean toward tech stocks, and the sector represents nearly 58% of VUG’s total holdings, another 18% or so is in consumer discretionary stocks. Tech might have been an outsized performer over the past decade, driving the S&P 500 to new record highs, but the consumer discretionary sector has been on fire, too.
Over the last 10 years, consumer discretionary stocks have tripled in value. So you are immediately casting the net for risk over a wider universe. Uou’re also bringing in companies like Apple, Costco (NASDAQ:COST), Netflix (NASDAQ:NFLX), and McDonald’s (NYSE:MCD) into your portfolio. Those four companies make up a combined 17% of VUG’s holdings.
Although tech has been the driving force for the market’s gains, a strong consumer has helped to incrementally push the index higher, too. In the last decade, the McDonald’s hamburger chain has grown by more than 300%, the warehouse club is up 750%, Apple is nearly 900% higher, and Netflix has rocketed 1,270% higher.
In contrast, the S&P 500 index put up 256% in total returns. The consumer-oriented stocks benefit investors from their global reach, which also helps reduce geographic risk. It should be noted VUG has outstripped the benchmark index by a wide margin as well, returning 330% for investors.
A compelling argument for growth
Vanguard Growth ETF is a fund investors should strongly consider for their portfolios. It is a low-cost avenue for capturing growth across some of the strongest businesses and industries today. Industrials and healthcare are also strongly represented, comprising 8.5% and 7%, respectively, of the portfolio.
You’re essentially juicing your returns with the best companies on the market in the fastest-growing sectors. While it does lean heavily into tech, a good argument can be made there will be no shortage of opportunity for further growth in the years ahead.
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