Large-Cap Growth Fund with a Low Cost

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

One of the goals of the giant exchange-traded fund Vanguard Growth ETF (VUG) is, in its own words, “to provide a convenient way to match the performance of many of the nation’s largest growth stocks.”

VUG does so by selecting a group of mostly large-cap, as well as some mid-cap companies based on six growth factors. They are: expected long-term growth in earnings per share (EPS), expected short-term growth in EPS, three-year historical growth in EPS, three-year historical growth in sales per share, current investment-to-assets ratio and return on assets.

VUG is a massive fund with $27.97 billion in total assets under management and an average daily trading volume of $82.8 million, giving it strong liquidity.

As a result of its focus on growth, VUG is heavily invested in the technology sector (28.23% of fund holdings). In particular, VUG favors the FANG (Facebook, Amazon, Netflix, and Google) stocks, which are four high-performing technology stocks in the market as of 2017. Other sectors the fund focuses on are consumer cyclical, 18.03%, and health care, 14.49%.

VUG prides itself on its management efficiency, which it passes down to its investors in the form of a super-low expense ratio of only 0.06%. This number is 95% lower than the average expense ratio of fund with similar holdings. Overall, this makes VUG a good choice for growth investors seeking inexpensive and diversified exposure.

It is worth noting that, as with all Vanguard funds, VUG’s holdings are disclosed monthly rather than daily. This limits the fund’s transparency and may discourage some sensitive investors.

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Top five holdings of the fund are Apple (AAPL), 6.77%; Amazon.com (AMZN), 3.89%; Facebook (FB), 3.88%; Alphabet Inc. A (GOOGL), 2.73%; and Alphabet Inc. C (GOOG), 2.66%.

For those who are looking for future growth, the Vanguard Growth ETF (VUG) may be worth adding to your portfolio.

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.

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