Putting money to work in individual stocks can work out extremely well. However, for some investors, adopting a more diversified and simplistic approach makes the most sense. Luckily, there are some compelling exchange-traded funds (ETFs) that provide investors with exposure to certain market themes and sectors.
That being said, if you have less than $1,000 to invest, look no further than the Vanguard S&P 500 Growth Index Fund ETF (NYSEMKT: VOOG). Here are three reasons why it deserves a place in your portfolio.
As its name suggests, the Vanguard S&P 500 Growth Index Fund ETF provides investors with exposure primarily to growth-oriented companies within the S&P 500 (SNPINDEX: ^GSPC). In total, this ETF contains 209 stocks, giving investors a lot of diversification within their overall portfolios.
Nonetheless, the fund has popular stocks investors are undoubtedly familiar with. The “Magnificent Seven” are extremely important. Combined, they represent 44.7% of the ETF. Their performance has a big impact on the fund.
Essentially, investors are betting heavily on the success of America’s most well-known growth businesses. The advantage is that someone doesn’t need expert financial modeling or investment analysis skills. Investing in the Vanguard S&P 500 Growth Index Fund ETF is a no-hassle, low-maintenance approach, freeing up lots of time for other endeavors.
Besides its exposure to growth, another reason investors should consider buying the Vanguard S&P 500 Growth Index Fund ETF is perhaps something people care about most: performance. In the past decade, it has generated a total return of 277%, well ahead of the overall S&P 500’s 230%. Investors would have nearly quadrupled their starting capital in 10 years — a wonderful result.
This ETF’s gains are even more impressive when zooming out. Since the fund’s inception in September 2010, it has outperformed the broader S&P 500 by a notable 131%. This type of performance speaks for itself.
You might think the ETF is saddled with a high fee that eats away at investor returns. However, this is not the case. The ETF’s expense ratio is just 0.07%. For every $1,000 invested, only $0.70 goes to the fee on an annual basis. Investors get to keep more of their money in the long run.
While it’s generally a good idea to put money to work in the stock market, now looks like a particularly good time to be on the offensive. As of this writing, the Vanguard S&P 500 Growth Index Fund ETF trades 9% below its all-time record, established in February. The market’s softness presents a worthwhile opportunity.
