Looking for long-term exposure that can last for decades? The Vanguard Growth Index Fund ETF Shares (VUG) could be the fund you’re looking for.
In essence, VUG offers investors the ideal set-it-and-forget-it set-up for their portfolios. Growth companies over time have outdone their value counterparts.
VUG tracks the performance of a benchmark index that measures the investment return of the CRSP US Large Cap Growth Index. The fund employs an indexing investment approach designed to track the performance of index, a broadly diversified index predominantly made up of growth stocks of large U.S. companies.
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. VUG’s expense ratio comes in at a low 0.04%.
“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 said. “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.”
High Optimism on High Growth
Right now, the value comeback is the talk of the town in equities, but the aforementioned chart highlights growth’s performance power. The latter is up 280%, while the former is up about 125%.
The disparity between the performance for growth over value is almost double. As for VUG, it’s up close to 300% the last decade.
“Growth ETFs can carry more risk than S&P 500 ETFs or Total Stock Market ETFs,” said Katie Brockman in a Motley Fool article that highlighted ETFs investors can hold for decades. “However, high-growth companies also tend to see higher average returns than more established corporations. And with more than 250 stocks in the fund, that helps diversify your portfolio and limit your risk.”
“In addition, the largest stocks in this particular growth ETF include Apple, Microsoft, Amazon, and Google’s parent company, Alphabet,” Brockman wrote. “While they are high-growth companies, they’re also solid companies with strong track records, which lowers your risk.”
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