This Fund Gives Exposure to Large-Cap Growth Companies

Jim Woods

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

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.

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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.

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