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.
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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.
