Exchange Traded Funds (ETFs)

This Fund Gives Exposure to Large-Cap Growth Companies

The Vanguard Growth ETF (VUG) aims to select mid- and large-cap U.S. companies that exhibit strong growth characteristics.

“Growth stocks” usually refers to companies that are likely to experience higher future revenues and earnings at a faster rate than the industry average. As a result, growth stocks tend to outperform during a market uptrend.

This fact was clearly illustrated in 2017, as the information technology (IT) sector returned an impressive 35.51% to top the gains of all other major sectors, including consumer discretionary (19.92%) and real estate (9.07%). The overall S&P 500 index returned around 19% for 2017.

VUG employs a passive, buy-and-hold approach. It has $31.51 billion in assets under management and an average daily trading volume of $88.63 million. This makes it a very liquid fund. The exchange-traded fund’s (ETF) operating efficiency is reflected in its low expense ratio of just 0.06%. Low expense ratios are a hallmark of many Vanguard funds.

The fund pays a quarterly distribution and has a distribution yield of 1.22%. Its most recent payout of $0.475 on December 27, 2017, was an increase of 15.6% over the previous distribution.

The chart below clearly shows that VUG went nowhere but up in 2017, with its share price increasing nearly every month. The fund touched an all-time high of $142.50 in December and returned about 29% for 2017. Zacks Investment rated VUG as one of the top growth funds of 2017 and has given it a “strong buy” rating.

While VUG is very focused on its goal of investing in large-cap growth companies, the fund spreads its holdings over a basket of 300-plus stocks, with none accounting for more than 7.2% of the fund’s total assets. Roughly 27% of the fund is invested in technology, 20% in consumer services and 12-13% in health care, financials and industrials.

VUG’s top five holdings are: Apple (AAPL), 7.20%; Amazon.com (AMZN), 4.34%; Facebook (FB), 3.80%; Alphabet Inc. A (GOOGL), 2.79%; and Alphabet Inc. C (GOOG), 2.73%.

If you are seeking a straightforward way to get into some of the biggest and best growth stocks, consider looking into Vanguard Growth ETF (VUG).

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.