The Leading Vanguard ETF in Performance for This Year, Worth Considering for 2025 Investments?
The Leading Vanguard ETF in Performance for This Year, Worth Considering for 2025 Investments?
Many investors are acquainted with the Vanguard S&P 500 ETF, a popular method to invest in the broader market. However, Vanguard offers over 80 different exchange-traded funds (ETFs), catering to a wide range of investor preferences.
The growth ETFs have been doing exceptionally well this year, a trend that often occurs during market upswings. When the S&P 500 (decrease of -1.07%) is performing well, growth stocks usually outperform. Conversely, when the market is down, growth stocks tend to underperform, while value stocks typically perform better.
In 2024, the top-performing growth ETF among Vanguard's offerings is the S&P 500 Growth ETF (decrease of -1.20%). Let's explore why it's leading the pack and if it's still a smart investment for 2025.
Growth and Diversification Equals a Top ETF
The S&P 500 Growth ETF, like all Vanguard's ETFs, follows an index. This ETF mirrors the S&P 500 Growth index, a collection of approximately 230 high-growth stocks within the benchmark.
While not as diversified as the S&P 500 itself, 230 stocks still result in a diversified portfolio. This diversity provides a safety net and reduces the need for investors to manually select stocks or worry about replacing underperformers.
This ETF boasts an expense ratio of 0.1%, higher than other similar ETFs with a 0.95% expense ratio, but it's also a top performer. It delivered a 36% return in 2024, beating the market's 25% increase and leading all of Vanguard's 88 ETFs.
Outperforming the Market in Good Times and Overall
The S&P 500 Growth ETF's strong performance isn't just a 2024 phenomenon. It has a long-term track record of outdoing the standard S&P 500 ETF. Over similar periods, the S&P 500 Growth ETF has posted an annualized gain of 16.4%, while the regular S&P 500 ETF has managed just 14.9%.
If you had invested $10,000 in each ETF at their inception, the S&P 500 Growth ETF would have yielded a higher return.
Can it Repeat in 2025?
The S&P 500 Growth ETF is heavily weighted towards the five largest stocks in its portfolio – Apple, Nvidia, Microsoft, Amazon, and Meta Platforms. These five companies account for 45.8% of the total portfolio. On the other hand, half of the other stocks account for less than 0.1% of the total.
Currently, these large companies are thriving and have immense opportunities in artificial intelligence. Consequently, growth ETFs like the S&P 500 Growth ETF grant investors exposure to the most profitable AI trends while lowering the risk associated with investing in a single stock or less diversified fund. This ETF also includes established and stable stocks, such as Visa and Costco Wholesale, which help balance out some of the riskier stocks. Vanguard assigns this ETF a risk rating of 4 out of 5, indicating it's relatively high-risk but not the highest risk.
Given the abundant tech opportunities in AI, I believe the S&P 500 Growth ETF will continue to climb in 2025. Its impressive long-term record assures me it remains a viable investment option for most investors, regardless of the market's direction in the coming year.
Investors can consider diversifying their portfolio by allocating money towards Vanguard's S&P 500 Growth ETF, which has delivered outstanding returns due to its focus on high-growth stocks. This finance strategy has the potential to yield substantial returns in 2025, especially given the opportunities in artificial intelligence.
To maximize returns and minimize risk, it's important to consistently monitor the performance of investments like the S&P 500 Growth ETF; regular investments and automatic rebalancing can help bolster long-term financial goals by taking advantage of market fluctuations.