Investing $1,000 in this Vanguard ETF costs just $1 annual fee, and it has outperformed the S&P 500 and Nasdaq Composite in 2024

Exchange-traded funds (ETFs) are a simple and easy way to invest in a variety of companies. Many low-cost Vanguard index funds mirror the performance of major benchmarks such as S&P 500 And this Nasdaq Composite — Diversification and obtaining broad-based market exposure. However, some Vanguard funds charge lower fees and have features that give them an edge over other funds.

Vanguard S&P 500 Growth ETF (Volume -0.14%, This year, it has outperformed the S&P 500 and the Nasdaq Composite. And the best part is that the fund charges a 0.10% expense ratio, meaning you only have to pay $1 in annual fees per $1,000 invested in the fund.

Here’s how this fund stacks up against other Vanguard ETFs, and why it’s a good buy right now.

Growth-Driven Markets

Even if you’ve been keeping an eye on broader market movements over the past few years, chances are you know that megacap growth companies like nvidia And Meta Platform pushing major indices to new highs. On June 5, Nvidia surpassed it Apple As the second most valuable company in the world. The sector or fund that invests in these types of stocks has performed quite well so far this year.

Vanguard Growth ETF ( VUG -0.10%, One of Vanguard’s most popular funds is this one, with net assets of $220 billion and an expense ratio of just 0.04%. Vanguard Mega Cap Growth ETF ( MGK 0.01%, It’s not that big, with only $18 billion in net assets and an expense ratio of 0.06%. But it’s beating the benchmark because of its high exposure to megacap growth stocks.

With net assets of just $10 billion, the Vanguard S&P 500 Growth ETF is even smaller. But so far this year, it has outperformed the Vanguard Growth ETF, the Vanguard Mega Cap Growth ETF, the S&P 500, and the Nasdaq Composite.

Vogue By data YCharts

The top holdings in all three funds are generally suspect MicrosoftApple, Nvidia, Amazon, AlphabetMeta Platform, etc. But interestingly, the Vanguard S&P 500 Growth ETF includes some important names that are absent in the other two ETFs. The most notable is BroadcomWhich is the eighth-largest holding in the Vanguard S&P 500 Growth ETF.

Oracle, UnitedHealth GroupAnd Procter & Gamble These are also the top 20 holdings that are not in the other two ETFs. You’ll also find industry-leading dividend stocks such as Home Depot Invested in the Vanguard S&P 500 Growth ETF, not the other two ETFs.

If you’re considering the advantages and disadvantages of different Vanguard ETFs, it’s important to understand how Vanguard structures its funds’ portfolios and how this strategy affects the holdings in other funds. For example, Vanguard Value ETF ( VTV -0.16%, In many ways, it is the counterpart to the Vanguard Growth ETF. Broadcom, UnitedHealth, Procter & Gamble, and Home Depot are all top 10 holdings in the fund. However, it does not include Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta Platform, and more. Tesla,

Meanwhile, the Mega Cap Growth ETF is highly concentrated among the top ideas. It has only 79 holdings, while the Vanguard S&P 500 Growth ETF has 229 holdings.

Betting big on certain sectors

You can think of the Vanguard S&P 500 Growth ETF as a mix of the Vanguard Growth ETF with some of the key holdings of the Vanguard Value ETF. Here’s how it compares Vanguard S&P 500 ETF (flight -0.13%,

Data source: Vanguard.

As you can see in the table, the Vanguard S&P 500 Growth ETF is heavily weighted in three sectors and has less exposure to consumer staples, energy, financials, healthcare, industrials, materials, real estate, and utilities than the S&P 500. But it’s not completely ignoring stable, dividend-paying companies — as some more aggressive growth funds do.

As mentioned, the Vanguard S&P 500 Growth ETF includes Procter & Gamble, UnitedHealth, and Home Depot – among its components. Dow Jones Industrial Average Those that reward shareholders with buybacks, dividend increases, and organic growth.

The largest oil and gas holding in the Vanguard S&P 500 Growth ETF is not a unified major ExxonMobil Or beambut exploration and production company ConocoPhillipsS — which focuses on the upstream side of the industry rather than refining, marketing and the rest of the value chain. This is another example of how the Vanguard S&P 500 Growth ETF is more aggressive than a pure-play S&P 500 fund but a more balanced option than the Vanguard Growth ETF or Vanguard Mega Cap Growth ETF.

A winning formula

If there’s one word that has defined the stock market’s winners last year and this year, it’s quality. Investors are paying up for companies with industry-leading positions, strong balance sheets and clear paths toward sustained growth and passing up on smaller companies with more uncertainty, even if many of those smaller companies are very cheap.

Quality, no matter the sector, has helped the Vanguard S&P 500 Growth ETF outperform other top growth-oriented ETFs and major indexes so far this year. The combination of being heavily weighted in top growth stocks and the fastest-growing sectors of the market — as well as including stable industry leaders in slower-growing sectors — has been very effective so far this year.

Overall, the ETF has the structure needed to beat the S&P 500 over the long term, without charging excessive fees. Investors looking for a basket of fast-growing, high-quality S&P 500 names without compromising on value may want to consider the Vanguard S&P 500 Growth ETF over other Vanguard funds.