One Easy Vanguard Fund to Buy Now

The US stock market is currently in a volatile situation. There’s a clear contrast between high borrowing costs and the rise of powerful growth trends like artificial intelligence (AI) and weight-loss drugs that have drawn investors to a smaller number of large-cap stocks these days. As a result, large-cap U.S. growth stocks outperformed small- and mid-cap stocks by more than 30 percentage points in 2023, a trend that only gained momentum in 2024.

In this regard, chip manufacturers Nvidia 59.1% increase in less than two full months to 2024, making it a weight loss giant. Eli Lilly The company’s stock price rose more than 32.2% during the same period. meta platformThe social media and metaverse giant also benefited from large-cap growth, with its stock up 36.8% in 2024.

NVDA Total Return Level data by YCharts.

Meanwhile, small- and mid-cap stocks have significantly underperformed large-cap growth stocks over the past 14 months due to persistently high inflation, rising borrowing costs and general risk aversion by investors. But it would definitely be a mistake to ignore these stocks.

Since 1926, small- and mid-cap stocks have delivered superior returns compared to large-cap stocks. This trend hasn’t held true for nearly 30 years, but once the Fed’s policies end, small and mid-cap stocks should be back to winning ways in the market. With interest rates taking center stage, these select large-cap growth stocks will eventually run out of steam, leaving growth investors to seek new, more profitable avenues.

Image source: Getty Images.

Once the market returns to historical norms, the Vanguard funds discussed below should perform the best.

Affordable growth funds

of Vanguard Midcap Index Fund (V.O. -0.19%), abbreviated as VO, screens stocks as the best buys in the current financial environment. It is designed to reflect the performance of CRSP US Midcap TR USDa widely used benchmark to measure the performance of mid-cap stocks.

That being said, VO is actually aimed at smaller, large-cap companies. Reflecting this fact, the company’s portfolio has a median market capitalization of $27.6 billion, which exceeds the generally accepted mid-cap limit of $10 billion.

The fund boasts a diversified portfolio of 333 stocks, with an emphasis on a select group of high-performing sectors including industrials, technology, consumer discretionary, and financials. VO’s diversified portfolio has averaged nearly 13% return growth over the past five years, which is quite remarkable for this fund category.

In terms of cost-effectiveness, VO is better than most other products. The expense ratio is very low at 0.04%, which is 95% lower than the category average. This low expense ratio makes this fund an attractive option for cost-conscious investors. Apart from cost-effectiveness, VO also offers shareholders a respectable yield of his 1.53% and a relatively low turnover of his 11.8%.

The fund’s portfolio includes many affordable growth stocks, making it a strong choice for investors looking for affordable growth. As of this writing, VO’s portfolio has a price-to-earnings ratio of 20.2. this is, S&P500is currently valued at a P/E ratio of nearly 24 times.

In terms of performance, VO has delivered a total return (before dividends reinvested and taxes) of 144% over the past 10 years. Although it lags behind the broader market, it still generates pretty healthy profits on its own. Moreover, it appears poised to outperform once borrowing costs normalize.

Overall, VO is a top choice for investors with a long-term perspective. A strategic focus on small-cap companies, a diversified portfolio, low expense ratios, and an emphasis on affordable growth stocks make the company an attractive choice in this top-tier market. ing.