In the span of just two years, the combined market cap of Nvidia (NASDAQ: NVDA), Apple (NASDAQ: AAPL), and Microsoft (NASDAQ: MSFT) has gone from $4.36 trillion to just over $10 trillion. Microsoft and Nvidia are already at the forefront of artificial intelligence (AI), while Apple plans to further integrate AI into its products and services.
The rapid rise in the value of these three companies in a relatively short amount of time has changed the landscape of the broader market. They now make up nearly 20% of the S&P 500 (SNPINDEX: ^GSPC) and a staggering 44% of the tech sector.
However, some investors may want even more exposure to growth than what an S&P 500 index fund could offer. You may also want to invest in companies like Nvidia, Apple, and Microsoft while not being limited to a tech sector exchange-traded fund (ETF).
With 183 holdings across a variety of sectors, a mere 0.04% expense ratio, and a combined 33.5% weighting in Nvidia, Apple, and Microsoft, the Vanguard Growth ETF (NYSEMKT: VUG) stands out as an ultra-low-cost way to invest in the top growth companies. Here's why the ETF could be worth buying at an all-time high.
The Vanguard Growth ETF celebrated its 20-year anniversary earlier this year. Formed out of the fallout of the dot-com bust, the ETF has been through multiple market downturns and built a track record as one of the most well-known go-to growth ETFs. Its net assets stand at over $260 billion, which is colossal for a non-index fund.
Over the last decade, the Vanguard Growth ETF has outperformed the S&P 500 even when factoring in dividends. And because its expense ratio is so low, or just $4 for every $10,000 invested, investors aren't holding back their performance with fees.
The simplest reasons to buy the Vanguard Growth ETF are that you want high exposure to mega-cap growth stocks, you are willing to pay a premium price for those top stocks, you don't want to own some of the larger stodgier companies in the S&P 500, you don't mind getting very little dividend income, and you are willing to endure the volatility of growth stocks.
Referring back to the chart above, you can see that the Vanguard Growth ETF has suffered some sizable sell-offs. Late 2018, early 2020, and 2022 saw drastic declines in top growth names. It's easy to forget now, but 2022 was an especially brutal year for growth investors. The very companies that have fueled explosive gains in 2023 and 2024 all underperformed the S&P 500 in 2022 -- leading the Vanguard Growth ETF to lose a third of its value.