The S&P500 has had another great year, up 27% as of Monday’s close. In five years, the broad index has almost doubled in value.
While that’s impressive, it also begs the question of whether the stock market is too hot to invest in right now. The concern many investors may have is whether the market is due for a slowdown, or worse, whether a bear market may be on the way.
Do you miss the morning spoon? Breakfast news delivers it all in one fast, silly and free daily newsletter. Register for free »
For growth investors today, rather than picking stocks individually, it may be safer to invest in an exchange-traded fund (ETF) that is less vulnerable to a single investment and can still generate solid returns over the long term. These types of investments allow you to reduce your risk while remaining invested in the market.
Some of the best Vanguard ETFs that could be very attractive to growth investors are the Vanguard Growth Index Fund ETF (NYSEMKT: VUG) and the Vanguard Mid-Cap Growth Index Fund ETF (NYSEMKT: VOT). Here’s why these can be ideal investments to buy and forget.
The appeal of the Vanguard Growth Index ETF is that it has exposure to major US stocks and is suitable for buy-and-hold investors as its expense ratio is low at just 0.04.%.
At the end of October, the ETF contained 182 stocks with high exposure to technology, accounting for 58% of the total weight. Apple, NvidiaAnd Microsoft are the fund’s top holdings, giving investors exposure to the world’s leading growth stocks. And those stocks have helped it outperform the S&P 500 over the past five years, with the fund more than doubling in value over that period.
While these stocks aren’t cheap investments these days, investing in top tech companies can still be a good way to position yourself for strong long-term returns. And by having a diversified investment, like the Vanguard Growth Index ETF, you’re not as dependent on a single stock as you would be if you picked individual companies to add to your portfolio.
For investors looking for some more upside potential, Vanguard’s Mid-Cap Growth Index Fund could be an attractive option. As the name suggests, it focuses on mid-cap stocks, which could have significant long-term potential given their more modest valuations.
These can sometimes be risky investments. However, the advantage of an ETF is that not only is the stock selection done for you, but the risk is also not that great given the diversification of the fund.
The fund contains 140 stocks and the average market capitalization is just under $38 billion. It is not strongly focused on one sector; Technology stocks represent 23% of stocks, followed by industrials at 22%, consumer discretionary at 14% and healthcare at 12% – the only sectors accounting for more than 10%.
The largest interest in the fund is Palantir Technologiesbut at around 2.3%, the percentage of the ETF’s total weight is not significant enough to have a drastic impact on the fund’s performance. There is solid diversification here, making the ETF a more balanced option than other funds. And the expense ratio of 0.07% is also quite low.
The fund has underperformed the market in recent years, but that does not mean the trend will continue. With technology stocks becoming overvalued, it may only be a matter of time before growth investors turn to stocks with more potential, such as many of the mid-cap stocks within this fund.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
-
Nvidia: If you had invested $1,000 when we doubled in 2009, you would have $369,349!*
-
Apple: If you had invested $1,000 when we doubled in 2008, you would have $45,990!*
-
Netflix: If you had invested $1,000 when we doubled in 2004, you would have $504,097!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns December 2, 2024
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, Palantir Technologies, Vanguard Index Funds-Vanguard Growth ETF, and Vanguard Index Funds-Vanguard Mid-Cap Growth ETF. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
2 Best Vanguard ETFs for Growth Investors to Buy and Forget, originally published by The Motley Fool
