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What are the biggest benefits of investing in exchange-traded funds (ETFs)? There are several possible answers. Perhaps for the best, ETFs offer an easy way to buy multiple blue-chip stocks at once.
of Vanguard Mega Cap Growth Index Fund ETF (NYSEMKT:MGK) is a great example. Nearly 59% of the Vanguard ETF is invested in stocks of the so-called Magnificent Seven.
great collection
If you see the words “index fund” in the name of an ETF, you can be sure that the ETF is trying to track the performance of an index. For the Vanguard Mega Cap Growth Index Fund ETF, the underlying index is the CRSP US Mega Cap Growth Index.
It’s no surprise that the Vanguard ETF is loaded with Magnificent Seven stocks, as it focuses on large-cap U.S. stocks with strong growth prospects. microsoft accounts for 14.6% of the ETF’s total portfolio, making it its largest holding. apple 12.69% is not that different.
Vanguard Mega Cap Growth Index Fund ETF represents 7.63% of the portfolio. Amazonwhich is on par with an investment of 7.3%. Nvidia. alphabet Next, it accounts for 6.97% of the ETF portfolio. The last two members of the Magnificent Seven are meta platform and teslarepresenting 5.32% and 2.67% of the fund’s assets, respectively.
Where is the remaining 41% of Vanguard ETF’s portfolio invested? The fund also owns 75 stocks. Many of them are mega cap winners. Eli Lilly and visa. However, not all of them meet the $200 billion market capitalization criteria to be classified as megacaps. For example, ETFs have relatively small stakes. boeing and ram researchBoth have market capitalizations of less than $130 billion.
I like it very much
There’s a lot for investors to like about the Vanguard Mega Cap Growth Index Fund ETF. This has been especially true over the past 12 months, with the ETF soaring more than 50% of his time.
This impressive performance is to be expected, given the ETF’s focus on mega-growth stocks. After all, four of the Magnificent Seven stocks are up more than 50% in the past 12 months, with Nvidia and Meta leading the pack.
But don’t just focus on a fund’s recent performance. Over the past five years, the Vanguard Mega Cap Growth Index Fund ETF returned an average of 19.59% per year. Since its inception in December 2007, the ETF has returned an average of 12.73% annually.
Vanguard is known for its low fees, and this supercap ETF doesn’t disappoint. Vanguard Mega Cap Growth Index Fund ETF has an annual expense ratio of just 0.07%. By comparison, similar funds have an average expense ratio of 0.96%.
Can I buy this Vanguard ETF without hesitation?
The main drawback to the Vanguard Mega Cap Growth Index Fund ETF is the same as the main drawback to the Magnificent Seven: valuation. The average price/earnings ratio of the 82 stocks held by the ETF is extremely high at 38.3 times.
Granted, this is a 12-month multiple. This Vanguard ETF’s valuation would almost certainly look a little more attractive using forward earnings multiples.However, the premium price means that this ETF do not have Purchase without hesitation.
On the other hand, mega-growth stocks (including stocks outside of the Magnificent Seven) can be big winners over the long term. I think the Vanguard Mega Cap Growth Index Fund ETF is a great option for investors who are willing to tolerate potentially high volatility and are looking for strong growth prospects.
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Keith Speights has held positions at Alphabet, Amazon, Apple, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Lam Research, Meta Platforms, Microsoft, Nvidia, Tesla, and Visa. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
59% of this Vanguard ETF is invested in “Magnificent Seven” stocks.Is it safe to buy now? Originally published by The Motley Fool
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