This Vanguard ETF costs just $4 in annual fees for a $5,000 investment, and it has outperformed the S&P 500 and Nasdaq Composite in 2024

The Vanguard Russell 1000 ETF offers greater diversification than S&P 500 or Nasdaq-100 funds.

Exchange-traded funds (ETFs) can be great passive income vehicles, especially when they’re low-cost. Vanguard Russell 1000 Growth ETF id=’action_msg_1373’> 0.33%,Its expense ratio is just 0.08%, meaning $5,000 invested in the fund would incur fees of just $4 per year.

The ETF hit an all-time high on Wednesday, keeping pace with the broader market rally. It has been one of Vanguard’s best-performing funds so far this year, topping the 17.7% return with a stunning 19.3% gain. Nasdaq Composite and 14% S&P 500,

Here’s information about the exchange-traded fund and why it could be worth buying now.

Image source: Getty Images.

Broad-based performance through a growth lens

Russell 1000 It is a market-cap-weighted index that includes the 1,000 largest U.S. companies. Given the top-heavy nature of the market, the Russell 1000 comprises approximately 93% of the total market cap of U.S. equities.

The Vanguard Russell 1000 Growth ETF essentially takes this group of candidates and narrows it down to the most growth-oriented companies. It includes 440 stocks, which is less than half of the Russell 1000. Here’s a comparison of the Vanguard Russell 1000 Growth ETF’s sector breakdown. Vanguard Russell 1000 ETF (Late 0.04%,,

Area

Vanguard Russell 1000 Growth ETF

Vanguard Russell 1000 ETF

technology

53.4%

32.8%

consumer discretionary

18.8%

14.1%

Health care

10.2%

11.7%

Industrial-

9.7%

12.9%

consumer staples

2.6%

4.8%

financial situation

2.5%

10.8%

real estate

0.8%

2.4%

Telecommunications

0.6%

2%

energy

0.6%

4.1%

basic materials

0.4%

1.8%

Utilities

0.4%

2.6%

Data source: Vanguard.

As you can see in the table, the Vanguard Russell 1000 Growth ETF has significantly less weighting in value-focused sectors like financials. More than 70% of the fund is concentrated in technology and consumer discretionary, compared to less than 50% for the Russell 1000.

Other Vanguard Growth Funds to Consider

The Vanguard Russell 1000 Growth ETF closely resembles Vanguard’s largest growth fund based on net assets. Vanguard Growth ETF ( VUG 0.34%,The Vanguard Growth ETF essentially picks the most growth-oriented companies from the S&P 500. So, it has a similar approach to the Vanguard Russell 1000 Growth ETF – just more focused on the largest companies.

It consists of 200 components and has an expense ratio of slightly less than 0.04%, compared to 0.08% for the Vanguard Russell 1000 Growth ETF. The difference is marginal unless you have hundreds of thousands of dollars invested in these funds.

Ultimately, the best Vanguard growth fund for you depends on how much you want to concentrate in the largest companies, rather than diversifying across a large pool of options. For example, there’s also Vanguard Mega Cap Growth ETF ( MGK 0.36%, — which has just 79 holdings and is more focused on the most valuable U.S. growth stocks by market capitalization. But as you can see in the chart, the Vanguard Russell 1000 Growth ETF, Vanguard Growth ETF, and Vanguard Mega Cap Growth ETF have all performed similarly this year.

MGK Charts

NSC By data YCharts

If you can handle the volatility, it’s a worthy passive income play

The dominant trend for 2024 has been megacap growth, so it makes sense why growth-oriented funds — and particularly funds focused on the largest market-cap companies — are outperforming the S&P 500 and the Nasdaq Composite.

However, the best use of low-cost ETFs isn’t to time the market based on whatever is going on in the short term, but rather to find a passive income vehicle that you like and feel comfortable holding even during periods of volatility.

Growth stocks are generally more volatile than value and income stocks. Growth ETFs achieve diversification, but it’s important to understand that they can also fall more than major benchmarks during a correction or a large stock market sell-off.

All three of the Vanguard ETFs discussed are good choices, but if you want exposure to more companies and a little less concentration in the biggest names, the Vanguard Russell 1000 Growth ETF may be the best choice.

Daniel Foelber has no investment in any stocks mentioned. The Motley Fool owns investments in and recommends Vanguard Index Funds-Vanguard Growth ETF. The Motley Fool has a disclosure policy.

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Disclaimer : The content in this article is for educational and informational purposes only.

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