Get access to dozens of the best growth stocks on the market with just a single purchase.
Growth isn’t cheap in a rallying stock market. That’s been a clear factor impacting investors’ returns in recent months. Demand in the past year has been strongest for large tech stocks, driving the Nasdaq Composite index up a blazing 36% compared to the S&P 500‘s 26% gain.
That surge made growth stocks more expensive, both in absolute terms and in comparison to their value-focused peers. That raised the risk that you’ll buy near a peak valuation while also making it harder to achieve diversification when you’re putting smaller amounts of capital — say $500 — to work.
An exchange-traded fund (ETF) offers a solution to both of those problems. Putting $500 into a growth ETF will give you exposure to hundreds of stocks with just a single purchase. You’ll still be susceptible to downturns but not nearly as much as you would be with just a few individual growth stocks in your portfolio.
Pick the wrong ETF, though, and you could end up seeing your returns eaten away by high fees, excess turnover, or both. That’s why one of the best growth funds you could buy today is the Vanguard Growth ETF (VUG -1.87%).
What’s the Vanguard Growth ETF about?
In exchange for about $340 per share as of this writing, buying even a single share of VUG will give you exposure to roughly 200 large-capitalization growth stocks.
You can tell that it is focused on growth by looking at a few key metrics. Over half of VUG’s funds are invested in the tech sector, for one. The average price-to-earnings (P/E) ratio for its stocks is 37 compared to the wider market’s 21. And companies in this fund are boosting earnings at a roughly 20% annual rate. You will get exposure to some of the fastest-growing stocks on the market with this fund, even if you’re paying a premium valuation for them.
Efficiency and costs
The Vanguard Growth ETF is a passively managed fund, which means it doesn’t employ a manager but instead uses algorithms to track the returns of its target-growth index. Expenses are near zero for that reason. You’ll only pay roughly $4 a year in management fees per $10,000 invested in the fund, while competitor growth funds can charge $100 or more for similar returns.
VUG doesn’t have high turnover, meaning it doesn’t jump in and out of stocks. That factor also helps keep costs low. It’s no wonder, then, that it is one of Vanguard’s most popular funds, with $226 billion of assets under management.
Composition and risks
VUG has trounced the wider market in recent months, rising nearly 38% (total return) in the past year. That rally raises the risk that you’ll overpay for this fund just when enthusiasm for its top holdings is running high.
VUG’s top holdings read like the list of “Magnificent Seven” stocks, adding some concentration risk in the tech sector. All seven of these tech giants are among the fund’s top-10 holdings, in fact, led by Microsoft and Apple, which together account for 24% of the fund’s total assets.
Yet VUG still represents an excellent way to gain exposure to a wide selection of growing tech companies like these. Sure, this growth ETF is likely to underperform the market during downturns, just as growth stocks tend to do. But cyclical slumps don’t threaten the long-term outlook for well-established companies. That’s why VUG is a great choice if you’re looking to add more of a growth focus to a diversified portfolio.
Demitri Kalogeropoulos has positions in Apple. The Motley Fool has positions in and recommends Apple, Microsoft, and Vanguard Index Funds-Vanguard Growth ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
