For the Long Haul, Bigger is Better With This Mega Cap ETF

When it comes to choosing exchange-traded funds (ETFs) for the long-term horizon, sometimes bigger is better with mega equities via the Vanguard Mega Cap Growth Index Fund ETF Shares (MGK).

“The concept of building your portfolio around several core positions that offer upside and consistent returns is a great way to approach long-term investing,” a Market Beat article noted. “By emphasizing buying large positions in companies with stable earnings and lower volatility, you can feel more comfortable taking risks with the rest of your portfolio and won’t have to worry as much about massive drawdowns in your account.”

MGK seeks to track the performance of the CRSP US Mega Cap Growth Index. The fund employs an indexing investment approach designed to track the performance of the index. The index is a float-adjusted, market-capitalization-weighted index designed to measure equity market performance of mega-capitalization growth stocks in the United States.

The Advisor attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.

Overall, MGK:

  • Seeks to track the performance of the CRSP US Mega Cap Growth Index.
  • Employs a passively managed, full-replication approach.
  • Provides a convenient way to get diversified exposure to the largest growth stocks in the U.S. market.

“Mega-cap stocks can be a great option for core positions since they are usually companies with a long history of success and will likely remain leaders in their respective industries for years to come,” the article added. “After all, a company doesn’t just grow to $200 billion or more in market capitalization overnight. The fact that these are the largest and most important companies in the world helps you to gain confidence in your portfolio and stay the course with your top holdings regardless of what the overall market is doing.”

MGK Chart

MGK data by YCharts

A Long-Term Solution

To help provide that long-term sustainability of growth, MGK’s top holdings are familiar names. In particular, MGK has over 30% of the fund’s allocation in Apple, Microsoft, and Amazon.

“Investors with a longer-term horizon ought to consider the importance of growth stocks and the diversification benefits they can add to any well-balanced portfolio,” an ETF Database analysis suggested. “Companies within the growth segment offer tremendous profit potential since they are still in the early stages of their life cycle, which in turn also raises the risk level associated with this asset class. Growth stocks may also appeal to those seeking capital appreciation versus dividend income, as these companies re-invest earnings.”

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