Exploring the Vanguard S&P 500 Growth ETF Performance
Understanding the S&P 500 Index
The S&P 500 (SNPINDEX: ^GSPC) is an index of 500 companies listed on U.S. stock exchanges. Admission into the index is a prestigious achievement, as only the highest-quality names make the cut.
Selection is ultimately at the discretion of the Index Committee; however, companies must demonstrate profitability and maintain a market capitalization of at least $18 billion. This figure continues to rise over time, as the S&P 500 is weighted by market capitalization, meaning that larger companies have a greater influence on the index's performance compared to smaller ones.
Consequently, technology now holds the title of the largest sector in the index, accounting for 31.4%. This sector comprises trillion-dollar giants like Microsoft, Apple, and Nvidia.
Exploring the S&P 500 Growth Index
The S&P 500 Growth index features around 231 of the best-performing stocks from the regular S&P 500, excluding those that do not meet specific criteria. The selection is based on factors such as momentum and sales growth of the underlying companies.
Consequently, it is not surprising that the technology sector represents a hefty 50.2% weighting in the Growth index. For instance, Nvidia reported an impressive revenue growth of 262% year-over-year during its latest quarter and has seen its stock soar by 200% within the past year.
The unique aspect of the Growth index is its quarterly rebalancing, which ensures only top-performing stocks are included while eliminating those that fail to meet criteria, enabling it to consistently outperform the regular S&P 500 over time.
Vanguard S&P 500 Growth ETF: A Close Tracker
The Vanguard S&P 500 Growth ETF (NYSEMKT: VOOG) is meticulously designed to mirror the performance of the S&P 500 Growth index by holding the same stocks and maintaining corresponding weightings.
The list below illustrates the top five holdings in the Vanguard ETF, along with their weightings compared to the regular S&P 500:
Top Holdings Comparison
Apple: 12.28% in Vanguard ETF vs. 6.89% in S&P 500
Microsoft: 11.93% in Vanguard ETF vs. 6.70% in S&P 500
Nvidia: 11.04% in Vanguard ETF vs. 6.20% in S&P 500
Amazon: 4.43% in Vanguard ETF vs. 3.69% in S&P 500
Meta Platforms: 4.17% in Vanguard ETF vs. 2.24% in S&P 500
According to Vanguard, portfolio weightings are regularly updated and are subject to change. Notably, the Vanguard ETF achieved a return of 36.5% in the previous year, while the S&P 500 was rated at 30.2%.
Long-term Performance of the Vanguard ETF
The Vanguard ETF has recorded a compound annual return of 15.9% since its inception in 2010, surpassing the average annual gain of 13.7% for the S&P 500 during the same period. Though a 2.2 percentage point difference may seem minor, the impact of compounding over years can be significant:
Investment Growth Example (Starting Balance $10,000)
Vanguard ETF: 15.9% growth = $78,916
S&P 500: 13.7% growth = $60,345
With sectors like cloud computing, semiconductors, and artificial intelligence driving growth, the dominant holdings in the Vanguard ETF are likely to persist. Therefore, it seems reasonable to predict that the ETF will continue outperforming the S&P 500 in the foreseeable future.
Considerations for Investment in Vanguard S&P 500 Growth ETF
Before deciding to invest in the Vanguard S&P 500 Growth ETF, it is crucial to weigh your options carefully.
Prospective investors should assess not only the quality of the Vanguard ETF but also how it fits into their overall investment strategy and portfolio diversification. The right investment approach could yield significant long-term returns.
Frequently Asked Questions
What is the S&P 500 index?
The S&P 500 index is a stock market index that comprises 500 of the largest U.S. publicly traded companies, representing various sectors.
How does the S&P 500 Growth index differ from the regular S&P 500?
The S&P 500 Growth index includes stocks that exhibit above-average growth potential and tends to have a higher concentration in technology companies compared to the regular S&P 500.
What is the Vanguard S&P 500 Growth ETF?
The Vanguard S&P 500 Growth ETF is an exchange-traded fund designed to track the performance of the S&P 500 Growth index by mirroring its holdings.
How has the Vanguard ETF performed over time?
The Vanguard ETF has outperformed the S&P 500 over the long term, achieving a higher compound annual return since its inception.
Should I invest in the Vanguard S&P 500 Growth ETF?
Investment decisions should be based on personal financial goals and risk tolerance; it's advisable to consider how the ETF aligns with your overall investment strategy.
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Disclaimer: The content of this article is solely for general informational purposes only; it does not represent legal, financial, or investment advice. Investors Hangout does not offer financial advice; the author is not a licensed financial advisor. Consult a qualified advisor before making any financial or investment decisions based on this article. The author's interpretation of publicly available data shapes the opinions presented here; as a result, they should not be taken as advice to purchase, sell, or hold any securities mentioned or any other investments. The author does not guarantee the accuracy, completeness, or timeliness of any material, providing it "as is." Information and market conditions may change; past performance is not indicative of future outcomes. If any of the material offered here is inaccurate, please contact us for corrections.
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